All the indices rose during the month with the Expectations Index seeing the biggest increase of three points to 94; continuing the general upward trend which began at the start of the year. The Present Situation Index, which has generally been falling since the end of 2007, rose by one point in August to 17; the first time this index has increased since April 2009.
Commenting, Martin Gahbauer, Nationwide's chief economist, said: "The moderate increase in confidence this month indicates that, for the first time since April, consumers are beginning to feel more positive, not only about the future, but also about the present situation. The rise in positive sentiment across all the indices is no surprise as a number of key economic indicators continue to show that we may have reached the bottom of the current recessionary cycle. It is likely that there will be a protracted recovery and we may see some volatility in the data as factors such as the rise in fuel duty affect sentiment. Although positive news about the housing market may have helped boost confidence, consumers' views about spending remain relatively cautious, possibly because the level of heavy discounting seen earlier in the year has now subsided."
Overall consumer confidence has been increasing since March, which may indicate that people are starting to believe that economic conditions are beginning to improve. At 63, the Consumer Confidence Index is now 19 points higher than at the start of the year (44) and 13 points higher when compared to the same period in 2008 (50). Sentiment towards the current economic situation has also improved since the start of the year. In February, the percentage of those believing the current economic situation to be bad was 86%, compared to 72% in August.
As the pace of economic decline slows and some key commentators suggest that the worst of the recession may be over, confidence continues to build around the future economic situation. The number of those believing the economy will be worse in six months time has been falling steadily since the start of the year. 21% of people now think conditions will be worse in six months, compared to 53% in January and 57% in August 2008. This appears to mirror the general view that market conditions will begin to improve as we move into next year.
Expectations about house price rises over the next six months fell slightly in August. Consumers now expect the value of their home to increase by 0.2% over the next six months, compared with 0.5% in July.
