Consumer Confidence Takes A Hit

Consumer confidence in the UK has fallen to its lowest level for at least four years as the economy shows signs of stalling.

The global economy, and in particular the US economy, have been seen to be struggling in recent weeks and the Federal Reserve in the US has slashed interest rates in increasingly desperate measures to try and stave off a recession.

Fears of job losses and the way consumers’ pockets have been hit in recent months with rising fuel and energy prices have led to a dent in consumer confidence, as shown by the Nationwide building society’s confidence index, which hit its lowest level since it was first started in May 2004.

The Bank of England’s Monetary Policy Committee is meeting this week, and will announce the latest interest rate on Thursday. It is thought by most experts that a cut of 0.25% is likely.

Martin Gahbayer, Nationwide’s senior economist, said: “’Sharp falls in share prices, the rising cost of essential items and a weak exchange rate have combined to negatively impact consumer sentiment.” He forecast a quarter-point rate cut, and added: “The expected cut may boost sentiment in the short term but it will be some time before consumer confidence is back to the levels reported a year ago.”

People are inevitably fearful for their jobs when the economy looks set for a downturn, especially as most people mortgage interest repayments are much higher than they were a couple of years ago. The ‘expectations’ of the survey also fell sharply.

The Bank faces a problem in that prices are rising sharply in many areas, despite the fact that consumers have finally cut back on their spend. It is not the usual supply and demand equation.

The rocketing price of oil has meant that household bills have been soaring, and people’s spending power has been cut as a result.

A quarter point cut this week is likely to be followed by more in coming months