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Nationwide Consumer Confidence Index

11 March 2006

• The Nationwide Consumer Confidence Index was started in May 2004 and judges Present Situation Index, Expectations Index and Spending Index as part of the overall Consumer Confidence Index.
• The Nationwide Consumer Confidence Index for February 2006 fell by four points to 94, the 9th fall in 12 months. This is the first time the main Index and the supporting indices have all decreased since the indexes inception.
• The report revealed confidence in the Present Situation has reached its lowest ever level, with rises in electricity, gas and petrol prices all denting consumer confidence. The Present Situation Index fell by six points, with a fall of 14 points compared to the same time last year.
• The report revealed retail performance was weak in January, with the Index reporting an eight point drop in February, suggesting retail sales for the month are likely to be 'subdued.'
• The Spending Index also reported point drops, with the Spending Index reporting the heaviest drop, at eight points. The number that believes it is a good time to make a household purchase has fallen from 60 per cent in January to 50 per cent in February.
• Spending confidence in major purchases decreased, with 27 per cent of the belief that it was a good time to buy, down from January's total of 31 per cent. 35 per cent of people argued it was a bad time to buy.
• The fall in the Nationwide Consumer Confidence Index Spending Index has bought it back in line with its three-month average.
• People's views about the current employment situation are experiencing a downturn, with 53 per cent confident about job availability, compared to 68 per cent a year ago, the Expectations Index revealed.
• People's view of the future job market is similarly pessimistic, with the proportion of people who think there will be more jobs available in six months time falling to 44 per cent, the lowest figure on record.
• With regards to future employment situations, the report revealed 27 per cent of people believe there are few jobs available, a 5 per cent leap from January's total of 22 per cent.
• Economic confidence has also suffered with 31 per cent of people of the belief that the economic situation will be worse in six months time. This figure is almost double 2005's figure that suggested 19 per cent of people were expecting the economy to deteriorate.
• 30 per cent of respondents expected household income to increase in six months time, while 60 per cent expected levels to remain static.
• Consumers expect house prices to rise 2.4 per cent over the coming six months, down from January's prediction of 2.6 per cent. This brings consumer predictions in line with Nationwide's forecast of a 0-3 per cent change over the year.
• All Indexes, other than the Spending Index, are below their three-month average levels.
• The main Index is two points above its lowest score of 92, recorded in October 2005.
• Stuart Bernau, executive director at Nationwide Building Society, said: "It is difficult to take any comfort from the latest figures. Bad news on jobs, retail sales, rising fuel and energy prices have all combined to undermine consumers' confidence. With many facing Council Tax rises and uncertainty on the high-street, the outlook is gloomy. Peoples' confidence in the present economic and employment situation is near all time lows. Unemployment is at its highest rate for three years and with more job losses being announced, the gloom could continue into the Spring."
• The report contradicted the Bank of England's Monetary Policy Committee (MPC) expectations of strong consumer spending in 2006, and suggested the MPC will be following high-street performance closely in the coming months.
• With regards to interest rates, the Nationwide MPC forecast revealed no one expects rates to increase, while 80 per cent expect rates to remain static. 20 per cent argued for a rate decrease, and Bernau said: "The MPC will need to consider weaker retail sales, rising energy prices and recent job losses when making is decision."
• Nationwide's Consumer Confidence Index is based on a monthly survey representative of the UK population. The February research took place from 23 January to 20 February 2006, with 1,000 people.
• The Nationwide Consumer Confidence Index is compiled in partnership with TNS, who conduct the research for the US index.