Consumer confidence remained weak last month, as the Consumer Confidence Index saw confidence fall three points in September, according to data released today.
Nationwide Building Society found that confidence dropped for the fourth month in a row and currently stands at 45, just four points above its all-time low recorded in February this year.
While it is hoped that the decision by the Bank of England to expand its asset purchase scheme in October will improve confidence going forward, economic growth is expected to remain weak in the next six months.
Robert Gardner, Nationwide’s Chief Economist, explained the importance of economic changes made by the government.
“It is possible that recent signs of concerted action by policymakers could bolster sentiment in the months ahead. The Bank of England increased its asset purchase scheme by £75 billion at the start of October and kept interest rates on hold at just 0.5 per cent,” he commented.
“The Chancellor also stated that the Treasury is exploring the possibility of “credit easing”, whereby measures would be introduced to help increase the flow of lending to small and medium-sized businesses.
“This could translate into increased consumer confidence if people believe these efforts will be successful in lifting the economy out of its current malaise.”
Last month, the Spending Index also recorded a fall, decreasing by two points to stand at 77 which, while disappointing, is some way above its all-time low despite the challenging economic environment.
However, the Present Situation Index, which reflects sentiment about the current economic and employment situation, fell two points to 21.
The proportion of consumers that believe the current economic situation is bad rose by three percentage points during the month to 71 per cent, while the percentage of consumers who believe there are many or some jobs available remained steady, at 24 per cent in September.
Gardener points out that labour market conditions have deteriorated, with the unemployment rate moving up to 8.1 per cent in the three months to August, its highest level for 15 years.
The cost of living is also sharply rising, as inflation grew to more than five per cent in September, more than twice the pace of underlying wage growth.
“Without strong growth, the UK labour market is unlikely to improve in the immediate future,” Gardner added.
“This appears to be a view shared by most households – just one in five believe there will be an improvement over the next six months leading to many or some jobs being available.
“The difficult jobs market situation is likely to continue to weigh heavily on confidence in the months ahead.”