Ongoing economic uncertainty, a further fall in house prices, rising unemployment and the impact of high food and fuel costs may have contributed to the drop in confidence, according to the society.
The Present Situation Index fell seven points to 39 during the month, reflecting the gloom about the current state of the economy. However, the Expectations Index and the Spending Index remained flat in September, perhaps suggesting that consumers do not think that things will continue to deteriorate at the current pace.
Fionnuala Earley, Nationwide's chief economist said: "Consumers have been adjusting the way they feel about the current economic and employment situation since July and this continues to be the main driver behind the drop in overall confidence in September.
While consumers recognise that there are some good deals available, rising unemployment, falling house prices and the continued turmoil in the financial markets are likely to mean that confidence will take some time to recover."
Consumers have become more pessimistic about the current economic and employment situation since the start of the year. Two thirds (66%) of those questioned believe the current economic situation is bad. Just under a quarter (23%) of consumers think that the economic situation today is normal and only one in ten (10%) believe it to be good.
However, consumers appear to be more optimistic about the future economic situation in September, with one in seven (14%) believing that the economy will be better in six months time, compared to 12% at the same time last year. However, the stabilisation in expectations of the future economy is likely to be a reflection of worsening conditions now.
Expectations about house price growth over the next six months dropped marginally; consumers now expect prices to fall by 4.9% over the next six months, compared with 4.6% in August.
