Consumers show lack of festive cheer in November
The Nationwide’s Consumer Confidence Index now stands at its lowest point since March 2009, and well below its long-run average of 82.
This decrease in sentiment has been driven by falls across all of the measures in November, in particular the Spending Index which fell by a substantial 13 points during the month. At 79, the Spending Index has now reached its lowest level for two years and is 29 points lower than at the same time last year.
The Present Situation and Expectations Index also saw a decrease in sentiment in November with these falling by five and nine points respectively. The Present Situation Index now stands at the same level as 12 months ago while, in contrast, the Expectations Index has fallen by 51 points over the same period.
Consumers expressed a growing pessimism towards the housing market in October and now expect the value of their home to decrease by 1.4% over the next six months. This compares to a decrease of 0.9% predicted in October.
Martin Gahbauer, Nationwide’s chief economist, said: “Despite the approach of the holiday season, there was a noticeable absence of festive cheer in November. Consumer confidence continued its downward trend during the month leaving the index close to the historic lows recorded at the beginning of 2009.
“The strong rally in sentiment that took place from the middle of 2009 into the first quarter of this year has now been almost completely reversed, even though the recovery has been stronger than most observers had expected. Just as the improvement in sentiment was driven by a renewed hope for the future, the fall in confidence can largely be attributed to consumers growing increasingly cautious over the outlook for the next six months.
“It seems that people still feel downbeat about their own situation. However, this is not uncommon in the early stages of a recovery. After all, the labour market, which is a vital factor underpinning confidence, often lags the upturn in the wider economy.
“The survey points to increased apprehension at future economic and employment prospects. Perceptions in this area will no doubt have a strong bearing on overall confidence in 2011. Furthermore, as austerity measures start to be felt more widely they could continue to weigh on confidence.
“Nonetheless, the Bank of England base rate is expected to remain at its record low of 0.5% well into 2011 and, if the recovery is maintained, next year may see sentiment return to more positive territory.”