Consumers predict flat house prices

Sarah Davidson

July 21, 2011

The mutual also revealed that consumer confidence in June fell four points back to levels not seen since January 2011.

The spending index fell by six points to 74 in June which Nationwide put down to continuing pressure on disposable income making it difficult for consumers to drive the recovery.

Mark Saddleton, Nationwide’s head of economic and market analysis, said: “Confidence returned to a more subdued level in June as the Index again failed to build any sustained momentum to lift it from its current low level.

“It continues to be consumers’ expectations towards the future situation which is primarily influencing the direction of the Index month-on-month.

“In June, a seven point fall in the Expectations Index had a dampening effect on the overall measure of confidence. This fall was mainly attributable to changes in perceptions of the general economic outlook rather than the future employment situation.

“Consumers are still facing challenging conditions with high inflation, fuel prices and unemployment weighing down on household budgets and sentiment.

“Combined with weak wage growth, spending power continues to be eroded and placed under significant pressure making it difficult for consumers to drive the recovery forward.

“With this in mind, it is not surprising that sentiment towards making either major or household purchases dipped slightly in June, indicating that consumers are feeling wary of taking on more debt or eating into their savings for big ticket purchases.

“There are signs that the weakness of consumer spending power is beginning to exert downward pressure on prices in the high street, and better than expected inflation figures for June give hope that there may be some respite for consumers ahead.

“Nonetheless, with food, energy and commodity prices still rising, it will be difficult for inflation to continue on this downward trend and it may still be some time before it returns to the Bank of England’s 2% target.”

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