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Consumer confidence jumps to nine month high

26th April 2012 Print

Nationwide Building Society, UK mortgage and savings provider has released its Consumer Confidence Index for March 2012.

Robert Gardner, Nationwide's chief economist, said "Much of the survey-based data has painted a more upbeat picture of the UK economy than official data in recent months - March's Consumer Confidence index continues that trend.  The main Index jumped nine points in March, which is at odds with the challenging economic backdrop, with the UK economy tipping back into recession in the first three months of the year.

"The Consumer Confidence index has been fairly volatile from month to month, but since reaching an all time low in September last year the trend has generally been towards increased confidence. It may be that the general decline in inflation from the recent highs of 5.2% last September to 3.5% in March has helped to support spending power and therefore lift consumers' spirits over the past six months.

"But with the economy expected to gather pace only slowly, the improvement in confidence may prove short-lived.  Indeed, the sharp falls in inflation seen at the start of the year are unlikely to be repeated in the near-term, with inflation likely to fall back towards the 2% target only slowly. As a result, the easing price pressures will be less visible to households in the months ahead than at the start of the year.

"Moreover, the apparent improvement in sentiment over the past six months should be kept in perspective. The main confidence index remains more than twenty points below its long-run average, suggesting that households are still cautious. 

Expectations improve during the month

"Peoples' assessment of their current situation and their expectations both improved, during the month. The Expectations Index is typically the most volatile of the three component indices, reflecting the unusually uncertain environment facing consumers at present.

"Sentiment towards spending on household goods improved in March with the Index recording an eight point jump, sitting 17 points higher than at the same time last year.  Despite this, the number of people looking to purchase household goods remains relatively unchanged over the last month.

"Given the continuing economic uncertainty, it is no surprise that consumers on the whole continue to remain cautious about making major purchases, with 41% of respondents viewing it as a bad time to make a major purchase.  Despite this, reservations eased slightly over the month with just over a quarter of respondents (26%) considering this to be a good time for such purchases, the highest percentage for ten months."