U.K. consumer confidence fell to a record low in February as Britons grew more pessimistic about the sustainability of the economic recovery and the outlook for jobs, Nationwide Building Society said.
An index of sentiment dropped 10 points to 38, the lowest since records began in 2004, the customer-owned lender said in an e-mailed report today. A measure of whether now is a good time to spend dropped 18 points to 52, also the lowest since the survey began.
“The U.K. recovery remains sluggish and there was little positive news in February,” Robert Gardner, chief economist at Swindon, England-based Nationwide, said in the report. “While we expect the recovery to get back on track in the quarters ahead, it may take a while for consumers to feel the benefits.”
The U.K. economy shrank in the fourth quarter, while inflation has soared to twice the Bank of England’s 2 percent target. Bank of England policy makers have split four ways as they debate whether to focus on boosting the recovery or curbing price pressures, and voted on March 10 to keep the benchmark interest rate at a record low of 0.5 percent.
“The labor market remains fragile” and “inflation is showing few signs of easing,” Gardner said. Oil prices have risen 37 percent in the last six months and U.K. unemployment rose by 27,000 in the three months through January to 2.53 million, the highest since 1994.
The pound fell 0.3 percent and traded at $1.6089 as of 9:24 a.m. in London. Bonds rose, with the yield on the 10-year gilt falling 3 basis points to 3.52 percent.
A gauge of consumers’ future expectations fell 14 points to 50 and an index of their view of the present situation slipped 3 points to 20, the lowest in 18 months, the report showed.
“High inflation has led many to expect interest rate rises by the summer, which may in turn have fanned concerns about mounting pressure on household budgets,” Gardner said. He sees rates on hold “until the back end of 2011.”
The Nationwide survey also showed that consumers remained pessimistic about Britain’s housing market, expecting the value of their home to fall by 1.1 percent over the next six months, the same as they predicted in January. TNS-RI interviewed 1,000 people for Nationwide between Jan. 24 and Feb. 20.