New Year, new confidence

Despite a downward stutter last month, the Nationwide Consumer Confidence Index recorded a three point increase in January to 73, almost double the level of confidence recorded during the same period last year (39%).

Expectations about house prices rose slightly in January, with consumers expecting the value of their home to increase by 1.1% over the next six months, compared to 1.0% in December.

While the Present Situation and Expectations indices both ticked up to 23 and 107 respectively, confidence in spending fell away sharply during the month and dropped to 96 in January from 108 in December.

Martin Gahbauer, Nationwide's chief economist, said: "The dip in confidence last month was a timely reminder that consumers remain cautious about the speed at which the UK will recover from what has been a longer and deeper recession than many expected.

Positive signs from the manufacturing sector and labour market may have helped boost confidence during January, but confidence is likely to remain fragile for some months to come. Heavy discounting on the high street and government driven incentives such as lower VAT, the car scrappage scheme and the stamp duty holiday combined to keep the Spending Index buoyant throughout much of 2009. The removal of these initiatives may now be causing consumers to reconsider parting with their cash at a time of year when we would normally expect to see high levels of spending confidence."

 

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