Feb. 6 (Bloomberg) -- U.K. consumer confidence fell to the lowest since at least 2004 in January as slowing economic growth, higher living costs and falling stock prices unnerved Britons, Nationwide Building Society said.

An index of sentiment taken from a survey of 1,000 people declined 4 points to 81, the least since the survey began in May 2004, Britain's fourth-biggest mortgage lender said today in an e-mailed statement.

The FTSE 100 stock index dropped 9 percent last month and the housing market has recorded the worst performance for more than a decade, adding to evidence that the economic slowdown is deepening. The Bank of England, which may cut interest rates tomorrow, is trying to balance the risks to growth against the threat of inflation as costs of energy and food rise.

``It's going to be very hard in the next couple of months for the consumer to find anything to feel happy about,'' David Page, an economist at Investec Securities in London, said in an interview. ``It's likely we will see more evidence of hard data slowing. We will see some marked slowdown in growth.''

The Bank of England will lower the benchmark rate by a quarter point to 5.25 percent tomorrow, according to the median of 61 economists in a Bloomberg News survey. While a cut is likely, there is a ``zero'' chance of a bigger reduction, former policy maker Stephen Nickell said in an interview.

Pound Falls

The pound dropped against 15 of the 16 most-active currencies tracked by Bloomberg as the decline in confidence added to evidence the economy is losing momentum. It fell as much as 0.5 percent against the dollar today and traded at $1.9585 at 12:14 p.m. in London.

Inflation pressures, a weaker currency and a drop in share prices combined to sap confidence among consumers during the month Nationwide said. The FTSE 100 index fell 9 percent in January, the most since the same month in 2003.

``Stocks are having a torrid time and the housing market, a much more important part of the consumer psyche, is unlikely to pick up,'' Investec's Page said.

House prices fell in the quarter through January after tripling in the past decade, HBOS Plc said yesterday. Property values slid for a third month in January, the longest stretch of declines since 2000, Nationwide said Jan. 31.

Nickell's View

A housing-market slump still ``won't be very big,'' said Nickell, who advises the government on housing policy. He predicted that an economic slowdown ``won't be that slow.''

Nationwide's gauge of sentiment on the present situation fell 5 points to 83, while expectations about the economy and the employment situation in six months dropped four points to 79. Taylor Nelson Sofres conducted the survey from Dec. 17 to Jan. 20.

Weaker confidence ``is not unexpected in light of current uncertainties about the economic outlook,'' said Martin Gahbauer, a senior economist at Nationwide. ``The expected rate cut in February may boost sentiment in the short-term, but it will be some time before consumer confidence is back to the levels reported a year ago.''

Economic growth may slow to 1.8 percent this year, matching the slowest pace since 1992, after expansion of 3.1 percent in 2007, a survey of economists by the Treasury shows.

Demand for permanent staff rose at the weakest pace in 26 months in January, the Recruitment and Employment Confederation and KPMG said in a separate report. Employment growth stayed close to December's 4 1/2-year low, the report showed.

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.

Last Updated: February 6, 2008 07:23 EST