U.K. consumer confidence rose in March from a record low as Britons grew more optimistic about the outlook for the economy and spending, Nationwide Building Society said.
An index of sentiment gained to 44 from a revised 39 in February, which was 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 make major purchases climbed 13 points to 66.
U.K. unemployment fell in the quarter through February as payrolls rose to the highest since 2009, strengthening Prime Minister David Cameron’s argument that the economy can withstand the biggest government budget squeeze since World War II. Still, with inflation at twice the Bank of England’s target and outpacing wage growth, households are seeing their spending power eroded at the fastest rate in more than 60 years.
“With the recovery still proving sluggish, it is unlikely that we will see a significant improvement in the coming months,” Robert Gardner, chief economist at Swindon, England-based Nationwide, said in the report. “It is far more likely that confidence will remain subdued for several months yet until the economy gains greater momentum.”
A gauge of consumers’ future expectations rose 9 points to 60 and an index of their view of the present situation gained 1 point to 21, the report showed. The percentage of the 1,002 people questioned for the survey who said the current economic situation was “bad” fell to 70 percent in March from 75 percent the previous month.
“While this is a welcome change in direction,” the increase in March “failed to reverse the fall suffered in the previous month,” Gardner said. “We will need to see a succession of increases before we can say that confidence has returned anywhere close to pre-recession levels.”
The Bank of England left its benchmark interest rate at a record low of 0.5 percent last week as the economic recovery takes priority over the threat from rising prices. Policy makers won respite from pressure to raise the rate after data on April 12 showed inflation slowed to 4 percent in March from 4.4 percent the previous month.
Gardner said the central bank may begin raising its key rate later this year and the impact on confidence “will depend crucially on the economic background against which they take place as well as the size and pace of any increases.”
The Nationwide survey also showed that consumers remain pessimistic about the housing market, expecting the value of their home to fall by 0.9 percent over the next six months. That compares with a predicted decline of 1.1 percent in February.
TNS-RI carried out the survey for Nationwide between Feb. 21 and March 20.