Confidence falls dramatically in September

Nia Williams

October 13, 2010

The index now stands at its lowest level for over a year and significantly below the long-run average of 83.

The Spending Index saw the biggest fall in September, decreasing by 14 points to 85 – the lowest level this measure has reached since November 2008, bringing it below the long-run average of 92.

Consumers’ faith in the present situation also fell back following the small gains seen since May of this year. At 22 points the Present Situation Index now stands at the same level as December 2009. Likewise, the Expectations Index fell notably by 12 points to 73 during September to reverse the previous months’ increase in sentiment.

Consumers expressed a guarded optimism towards the housing market in September, with a very marginal improvement in sentiment. Consumers now expect the value of their home to increase by 0.1% over the next six months. This compares to a fall of 0.1% predicted in August.

Martin Gahbauer, Nationwide’s chief economist, said: “September saw confidence return to its downward path following what now appears to have been a temporary uplift in sentiment during August.

“August figures had suggested that confidence may have turned the corner following a succession of falls in the run up to and after the recent General Election. However, these gains have now been reversed following a notable drop in confidence across all main indices in September.

“It would seem that the pessimistic sentiments of a few months ago have been renewed and this has perhaps been driven by a realisation of the true impact of the cuts announced in the emergency Budget.

“The Government’s impending Spending Review is likely to have a strong influence on consumer confidence in the coming weeks and we can expect the index to remain volatile until the full impact of this has been assessed.”

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