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Consumer Confidence Falls In UK PDF Print E-mail
Written by TNS   
19 Jul 2007

Consumer Confidence Falls In UK
First time in six months.

The Nationwide Consumer Confidence Index fell in June for the first time since December 2006.
The fall reversed half of the dramatic rise in confidence recorded in May.

The Present Situation Index (how consumers feel about the current economic and employment
situation) and Expectations Index (how consumers feel about the economic and employment
situation in six months time) also fell in June. The Spending Index (consumer's propensity to
spend) was the only index to increase, rising two points in the month, but remains broadly flat in
comparison to the previous six months.

The Present Situation Index fell from 101 in May to 98 in June following three months of
consecutive rises but remains nine points higher than this time last year. The Expectations Index
fell for the first time in six months to 93, and is now well below the level at this time last year.
The UK Nationwide Consumer Confidence Index uses a similar methodology to that of the US
Conference Board, the most highly regarded Consumer Confidence Index in the US, widely
acknowledged as a key US economic indicator. The monthly survey is compiled in partnership
with TNS.

Fionnuala Earley, Nationwide's Chief Economist, said: "The fall in confidence in June reflects
some weakening sentiment about the economy and jobs, both now and in the future. Higher
interest rates are likely to be a major factor behind this as consumers recognise their impact on
the wider economy as well as on their own pockets. Spending confidence ticked up very slightly
in June but overall it is significantly lower than this time last year. It now seems likely that rates
will rise in July with a significant risk of a further increase in the autumn, we expect to see
consumers tightening their belts in the months to come."

Looking forward, consumers are slightly subdued Consumers' outlook for the next six months is
fairly subdued and much lower than at this time last year. This is driven mainly by a less
optimistic feeling about the future economic situation. More people now feel negative about the
future economic situation whilst the number of people who are positive about the future economic
situation fell marginally in June from 15% to 13%.

June saw a complete reversal in which indices rose and which fell. In May, the Spending Index
was the only Index to fall whilst in June, it was the only Index to rise. Spending confidence has
been volatile but it can be affected by the season so despite confidence during the month
recovering slowly, the overall trend is down reinforcing the suggestion that the latest series of
interest rate hikes is now taking its toll.

As expected, recent interest rate rises have appeared to impact on consumer's expectations of
future house prices. People's expectations of house price growth have become more realistic,
falling to 2.9% after reaching a high of 4.5% in May. Moving forward, we anticipate some
slackening in the housing market as rising interest rates affect affordability.
The Nationwide Consumer Confidence Index fell four points in June (research took place from 21
May to 17 June).

In addition to the main Nationwide Consumer Confidence Index, the Society tracks three other
indices: Present Situation Index, Expectations Index and Spending Index. Present Situation
Index: fell three points in June following three consecutive months of rises. The number of people
who are positive about the current economic situation has remained stable at 48%, whilst the
number of people who think there are many jobs currently available has fallen from 60% to 57%.

The number of people who think the current economic situation is ÏnormalÓ has fallen to 32% - its
lowest level since May 2006. Expectations Index: fell four points from 97 to 93. This is the first
time this index has fallen since December 2006. The number of people who are positive about
the future economic situation fell marginally in June from 15% to 13% whilst the number of people
who are positive about the future employment situation has remained stable at 46% in June. The
number of people who feel that there will be neither many nor few jobs available in six months'
time has fallen to 18% - down from 25% in May.

Spending Index: rose two points - the only index to rise in June. Despite the overall increase in
this index, the number of people who think that now is a good time to make household purchases,
such as white or brown goods, fell from 51% to 45% in June. In contrast, the number of people
who believe that now is neither a good nor bad time to buy household goods has risen from 41%
to 45% - its highest ever level*.

The Nationwide Consumer Confidence Index (CCI): The Nationwide CCI is based on a similar
approach to that used by the U.S. Conference Board which produces the highly regarded U.S.
Consumer Confidence Index which has run since 1967 and is widely acknowledged as being a
key economic indicator. The Nationwide Consumer Confidence Index is compiled in partnership
with TNS, the market research group that conducts the research for the US index. *The
Nationwide Consumer Confidence Index was first published in May 2004. # For June, the TNS
research for Nationwide took place from 21st May 2007 to the 17th June 2007 with 1004 people.
The House Price Expectations data is based on a balance of people who believe that house
prices will be higher in six months time against those who think they will be lower in six months
time.

Nationwide's Consumer Confidence Index is based on a monthly survey representative of the UK
population. For June, the TNS research for Nationwide took place from 21st May 2007 to the 17th
June 2007 with 1004 people. NFO, now part of TNS, has worked with The US Conference Board
since the inception of its consumer confidence index in 1967.

Last Updated ( 26 Jul 2007 )
 
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