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U.K. Consumer Confidence Falls on Mounting Economic Concerns

U.K. consumer confidence fell in April as Britons grew more pessimistic about the outlook for the economy and spending, Nationwide Building Society said.

An index of sentiment slipped to 43 from a revised 45 in March, when it rebounded from a record low, the customer-owned lender said in an e-mailed report today. A gauge of whether now is a good time to make major purchases dropped 5 points to 62.

U.K. unemployment claims rose at their fastest rate since January 2010 last month, underlining the fragility of the economic recovery as government spending cuts and quickening inflation sap household confidence. The economy stagnated in the six months through March and Bank of England officials yesterday said an interest-rate increase now could damp consumer spending.

“Consumers are still feeling downbeat about the current situation and there is little to suggest that they expect things to improve much over the coming months,” Robert Gardner, chief economist at Swindon, England-based Nationwide, said in the report. “It now seems fairly safe to say that the uptick we saw in March was not the beginning of any sustained resurgence.”

A gauge of consumers’ future expectations for the economy over the next six months fell 2 points to 58 and an index of their view of the present situation dropped 2 points to 19. The percentage of the 1,002 people questioned for the survey who said this is a good time to make a major purchase such as a car or a home fell to 20 percent in April from 23 percent.

Inflation Risk

The Bank of England held its key interest rate at a record low on May 5 to aid the economy’s recovery. Policy makers have forecast that inflation may accelerate to 5 percent in the coming months and said that risks to growth are “skewed to the downside.”

“Inflation is roughly double annual earnings growth, meaning that consumers still lack the spending power to help drive the economy forward,” Gardner said. If the Bank of England’s forecasts of faster inflation and weaker growth are correct, confidence may come under further pressure, he said.

Nationwide’s April confidence survey also showed that consumers became more pessimistic about the housing market last month. They expect the value of their home to fall by 1.1 percent over the next six months, compared with a prediction of 0.9 percent in March.

TNS-RI carried out the survey for Nationwide between March 21 and April 21.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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