U.K. Nationwide Consumer Confidence Climbs to Five-Month High

U.K. consumer confidence rose in January to the highest in five months on signs of strength in the economy, according to Nationwide Building Society, which said the increase may be a “temporary bounce.”

An index of sentiment rose to 47 from 38 the previous month, the Swindon, England-based customer-owned lender said in an e-mailed report today. The reading was down 2 points from a year earlier. A gauge of consumers’ outlook for the economy jumped by 14 points.

Pressure on consumers eased last month as inflation dropped to a 14-month low of 3.9 percent. While Bank of England Governor Mervyn King said yesterday growth will gradually strengthen this year as household incomes improve, the recovery may be “slow and uncertain” amid turmoil in Europe and the government’s fiscal squeeze.

“Renewed hope that the U.K. will avoid a double-dip recession may support sentiment, especially since the downward trend in inflation is set to continue,” Robert Gardner, chief economist at Nationwide, said in the report. “With the U.K. recovery likely to remain weak in the first half of the year, a significant and sustained rise in consumer confidence remains unlikely in the near term.”

A gauge of Britons’ assessment of their present situation rose 2 points to 21, while a measure of their expectations for the economy increased to 64 from 50. An index of shoppers’ views on whether it’s a good time to make a major purchase, such as a house or car, increased 1 point to 78.

Consumer Squeeze

Inflation slowed last month as a sales-tax increase in January 2011 dropped out of calculations. King said at a press conference yesterday in London that households “are already beginning to see some benefit.”

Still, the outlook faces risks from Europe’s sovereign debt crisis that has already strained credit conditions and may jeopardize U.K. exports, King said. He spoke a day after Chancellor of the Exchequer George Osborne pledged to stick to plans for the biggest spending squeeze since World War II to tame the public deficit.

“The path of recovery is likely to be slow and uncertain,” King said. “The biggest risk to the recovery stems from developments in the euro area, where there remain concerns about the indebtedness and competitiveness of some member countries.”

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

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

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