Confidence is on the up in spite of cuts

CONSUMER confidence rose last month bucking the downward trend of the previous three months as expectations for the future of the economy appeared to improve on the back of positive second quarter GDP growth and improving employment statistics.

Nationwide’s consumer confidence index rose five points to 61 in August although the index remains significantly below the long-term average of 83. However, expectations for the future rose seven points to 84, shrugging off the impending austerity cuts, and beginning the recovery from the massive drop of 43 points in the five months from February 2010.

Mark Saddleton, Nationwide’s head of economic and market analysis, said: “Consumers expressed greater optimism during August causing the index to recover some of the ground lost since its interim peak in February. It may be that the recent dip was a product of increased caution following the general election as consumers assessed what direct impact a change in government and new austerity measures would have on their individual circumstances.”

However, consumers remained pessimistic about the future of the housing market. Consumers now expect the value of their home to decrease by 0.1 per cent over the next six months – a decrease of half a percentage point from July’s figure – which saw a 0.4 per cent rise.

Saddleton said confidence would also be affected by speculation over public spending cuts and a difficult jobs market, but positive retail sales on the high street and continued low interest rates would help to stem any further falls.

He added: “While there is still a long way to go before it can be said that confidence has returned, these figures are an encouraging sign that consumers may be starting to feel more upbeat as the UK continues to recover from its deepest recession since World War II. However, based on these results alone, it is difficult to say with any degree of certainty whether such optimism will remain for a sustained period of time forcing an upwards curve in confidence.”