UK consumer confidence fell significantly in May, after rising only slightly in April, having hit a two-year high in February, according to the latest Nationwide Consumer Confidence survey.
The expectations index posted the sharpest decline, repeating the same pattern seen in April.
The Nationwide Consumer Confidence Index fell to 65 in May from a revised 75 in April (previously 74), and now stands only 10 points above the reading of a year ago, when the UK economy was still in recession.
The sovereign debt crisis in the Eurozone and the travel disruptions caused by the volcanic ash cloud hurt consumer confidence during this period. Coupled with the Coalitions downbeat preparation for the austerity measures ahead.
The expectations index dropped to 93 in May from 105 in April. This index has now fallen 26 points since February, as the much-anticipated post-election pick-up in confidence has failed to materialise.
Sentiment towards the labour market on the other hand remains surprisingly and perhaps irrationally stable despite still high unemployment numbers. The percentage of consumers who believe there are not many or few jobs available fell by 2% to 59% in May, its lowest level since December 2008. This suggests that consumers have not factored in the job losses that will be coming through from the public sector in the third quarter.
The proportion of people who believe the economic situation will be worse than today in six months time increased by 7% to 22%, the highest reading since June 2009. Forty five percent said it would remain the same and 30% see an improvement.
The post 22nd June report will make an interesting contrast.
Author: Chris Slay
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