Consumer confidence falls
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The Nationwide Consumer Confidence Index recorded a five point decrease in December to 69, its biggest fall since November 2008.
While the Present Situation Index remained unchanged on 20 points, the Expectations Index saw a significant drop, decreasing eight points to 101 in December.
However, this index still remains high when compared to historical figures following a strong rally in 2009. The Spending Index recorded a one point fall during the month and has remained broadly stable now since September.
Expectations about house prices remained constant in December, with consumers expecting the value of their home to increase by 1% over the next six months.
While over a third, 35%, of consumers believe now to be a good time to make a major purchase, the percentage of consumers who believe it is a bad time increased by four percentage points to 38% in December - perhaps reflecting concerns over the end of the Stamp Duty holiday and the VAT rate increase in January 2010.
By contrast, the proportion of consumers that believe now to be a bad time to buy household goods fell by two percentage points to 13% in December.
Martin Gahbauer, chief economist at Nationwide, says: “The five point fall in confidence in December suggests that an element of caution may have begun to creep back into the minds of consumers over the Christmas period. This comes at the end of a positive year for the index, which gained some upwards momentum in 2009 to help claw its way up from the record low seen in January.
“The main driver behind this revival is likely to have been a renewed hope for the future economic situation and a belief that the worst of the recession is over. However, the looming VAT hike and other tax changes announced in the Pre-Budget Report may have impacted on confidence in December, forcing people to review their expectations for the future. Although it is still early days, these lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn.”
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