Bank bail-out improves confidence of consumers
Government action to support the banks helped to lift consumer confidence during October for the first time since December, figures showed yesterday.
Nationwide said its consumer confidence index rose by eight per cent last month, lifting it from a record low of 51 to 55.
The increase came despite people feeling increasingly pessimistic about the current state of the economy and employment prospects, with the present situation index falling by 10 per cent to hit a new record low of 35.
The group said people’s outlook was buoyed by the action taken by the Government and Bank of England to boost the financial markets, with confidence jumping by 23 per cent following the Government’s announcement on its bail-out plan for the banking sector.
But despite this, the reality of the present situation appears to be hitting home, with 75 per cent of people now saying they think the current economic situation is bad, while 41 per cent think there are few jobs available at the moment.
Consumers are slightly more upbeat about the future, with 38 per cent of consumers thinking the economic situation will be worse in six month’s time, down from 53 per cent in September, while the proportion who think it will be better nearly doubled to 27 per cent in October, compared with 14 per cent the previous month.
However, people remain pessimistic about employment prospects, with 56 per cent expecting there to be fewer jobs available in six months’ time, up from 48 per cent in September.
Fionnuala Earley, Nationwide’s chief economist, said: “The actions taken by the Government and the Bank of England to support financial markets do seem to have buoyed consumers’ confidence and could be responsible for the increased confidence in the future economic situation.
“However, with the economy heading into recession, there will be bumpy times ahead for the UK consumer and it is likely to be some time before confidence returns to the level of a year ago.
“Rapid cuts in interest rates are however on the horizon and this may support a recovery in confidence going forward.”
There was a slight increase in the number of people who thought it was a good time to buy household goods during the month, rising from 26 per cent in September to 29 per cent, although Nationwide said this may be due to discounting by retailers.