Biggest drop in year for UK consumer confidence
UK consumer confidence fell in December by the most in more than a year as expectations for the economy deteriorated, Nationwide Building Society in Britain has said.
The index of consumer sentiment declined five points from the previous month to 69, the biggest drop since November 2008, the customer-owned lender said in an email statement today.
A measure of consumers' economic expectations in the next six months fell eight points to 101. With December marking the annual Christmas season shopping peak, the report may signal a setback for retail spending as consumers brace for higher taxes to curb Britain's record budget deficit.
Prime Minister Gordon Brown is trying to revive the economy and restore voter support before a June election.
"An element of caution may have begun to creep back into the minds of consumers," Nationwide Chief Economist Martin Gahbauer said in the statement. "Lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn."
A gauge of whether consumers think it's a good time to make big purchases dropped to 106 last month from 107 in November, Nationwide said.
"The drop is slightly surprising," David Page, an economist at Investec Securities, said.
"It may well be as people look forward to 2010, they are focusing on the issues that are still going to make it very difficult for households across the year."
"The looming VAT hike and other tax changes announced in the pre-budget report may have impacted on confidence in December, forcing people to review their expectations for the future," Mr Gahbauer said.
Greg Hodge, an analyst at the London-based industry research firm Planet Retail Ltd. said the confidence report was "bad news".
"You have two types of people --people that are looking to save for the rainy day are worried about the future, and people who sit on various mortgages who are still relatively cash-rich," he said.
"Those people seem to have overridden the negative people preparing for the rainy day."
A UK index of service industries showed faster expansion in December, a survey by Markit Economics and the Chartered Institute of Purchasing and Supply said yesterday.