According to its Consumer Confidence Index, consumers are just as happy with their finances now as they were a year ago after overall confidence recovered from significantly weaker sentiment during the year.
While the Spending Index fell by eight points in October to continue its downward trend, the number of people who are negative about the future employment situation hit its lowest level since February 2005.
The Present Situation Index which denotes how consumers feel about the current economic and employment situation also fell - reflecting consumers' increased gloom about the current situation. This could well be the reason why they feel less willing to spend.
However, the Expectations Index - how consumers feel about the economic and employment situation in six months time - was more upbeat and was the only index to rise in October.
The survey showed that much of the change in sentiment is to a neutral, rather than a rising position. Nevertheless, while consumers remain fairly secure about the employment situation, it is unlikely that overall consumer confidence will go into freefall.
Fionnuala Earley, Nationwide’s chief economist, said: “Consumer’s confidence seems, so far, to have remained resilient in the face of the recent highly visible upset in the financial markets.
"While there is a continued reluctance to spend, the credit crunch has not had a sharp effect on overall consumer sentiment with consumers still very happy about the prospects in the labour market and for household finances.
"Looking forward, it is likely that we will see some weakening in confidence as the economy begins to slow, although some of the effect may be offset by the cuts in the base rate we expect in 2008.”
However the impact this will have on the mortgage market could be yet to be seen. Just 14 per cent of consumers are confident that now is a good time to make a major purchase – such as a house or a car. While some of this may be due to softer expectations for house prices, it may also have been affected by perceptions about the availability and cost of credit resulting from the credit crunch.
