The Index fell by seven points in the month, bringing the level to 70 - 22% lower than April last year. The biggest factor behind the drop in confidence is dwindling consumer sentiment about the economic situation since last autumn.
All four measures of confidence dropped in April. The biggest shift was in consumer sentiment about the current economic situation, which fell nine points to 65. This was largely driven by a downward shift in confidence around the current economic situation. Consumer sentiment about the economic and employment situation and their income in six months’ time (the Expectations Index) fell for the first time this year from 79 to 74 and consumer intention to spend on household goods and major purchases (Spending Index) fell two points to 65.
Commenting on this, Fionnuala Earley, Nationwide’s chief economist, said: “The cut in interest rates in April did little to lift consumer spirits. Food and fuel prices remain high and, with house prices no longer rising, it is unlikely that consumer confidence will pick up very quickly. We may have to accept that confidence levels could well worsen before they get better. This is especially true as inflationary pressures mean the MPC will probably prefer to cut rates at a more gradual pace than many would prefer.”
Looking ahead, almost half (45%) of consumers believe that the economy will be worse in six months’ time, compared to 26% who thought this at the same time last year. Weaker confidence in the economic future also seems to coincide with developments in the financial markets and suggests that consumers think that the credit crunch will have some lasting economic impact.
Despite a slight improvement in March, expectations around house prices fell once again in April. Consumers anticipate that house prices will fall by -1.7% over the next six months.
