Looking at movements in confidence within the month shows that consumers seem to have been buoyed by the actions announced by the Government and the Bank of England. Confidence levels increased by 23% during the period of the Government's announcement of its support to the banking sector.
The gloomy economic news has clearly affected consumers' perceptions of where we are now. Confidence in the present situation fell by 10% to 35 during the month. However, consumers spending confidence increased a little, from 53 in September to 55 in October, perhaps reflecting their observations of heavy discounts. The biggest uplift in confidence was due to consumers perceptions about the future. The Expectations Index (reflecting views of the economy and labour market in six months time) increased by 17% to 69 in October.
Fionnuala Earley, Nationwide's chief economist said: "The actions taken by the Government and the Bank of England to support financial markets do seem to have buoyed consumers' confidence and could be responsible for the increased confidence in the future economic situation. However, with the economy heading into recession, there will be bumpy times ahead for the UK consumer and it is likely to be some time before confidence returns to the level of a year ago. Rapid cuts in interest rates are however on the horizon and this may support a recovery in confidence going forward."
Consumers more pessimistic about the current economy, but think the future economy looks brighter
The reality of the downturn seems to be hitting home, with three quarters (75%) now believing that the current economic situation is bad. This is perhaps reinforced by the need for the actions taken in the financial markets. Only 8% now think the current situation is good. While 38% of consumers believe that economic conditions will be worse in six months time, there was a big uplift in the proportion thinking the situation would be better in six months time, this almost doubled to 27% in October from 14% in September.
People's views on employment continue to deteriorate
Consumers are however feeling increasingly gloomy about the jobs market, both now and in six months time. 41% of consumers think there are few jobs available now, up from 35% last month. Looking forward, over half
(56%) think there will be few jobs available in six months, up from 48% in September.
Consumers tighten purse strings
Two thirds (66%) believe now is a bad time to make a major purchase such as a house or a car, compared to 64% in September. A squeeze on incomes, higher living costs and gloomy economic reports are likely to have contributed to sentiment. The highest proportion of people (41%) are indifferent about purchasing household goods, believing that now is neither a good nor bad time to buy.
Expectations about house prices over the next six months continued to fall. Consumers now expect prices to fall by 5.6% over the next six months, compared with 4.9% in September.
