Consumer confidence continues to creep up in May

The Nationwide Consumer Confidence Index rose by two points in May, a more moderate change following the sharp increase in April. The Expectations and Spending indices also recorded increases during the month to 76 and 101 respectively. The Present Situation Index fell to 17 in May from 21 in April.

The changes reflect the raft of mixed news and economic data which emerged during the month as economic uncertainty remains. It is likely that confidence will continue to fluctuate as consumers react to further news reports on the health of the UK economy.

Martin Gahbauer, Nationwide's chief economist, said: "The more modest change in overall consumer confidence this month is no surprise and, as we continue to see contrasting news about the state of the economy, it is likely that confidence will remain fragile. While some reports suggest tentative signs of a slowing in the pace of economic decline, it is important to remember that a number of sectors are continuing to contract and any recovery is likely to be sluggish. What is clear from our findings is that while consumers remain pessimistic about the present situation, they appear to be much more confident about the future than they were at the beginning of the year."

Consumers are positive about the future...
Expectations about the economic and employment situation in six months' time remained buoyant during May as consumers continue to believe that conditions will improve in the future. 28% of those questioned now think that the economic situation in six months' time will be better than it is today, the highest figure ever seen[1] in response to this question. Equally, 28% believe the economic situation will be worse than today, a four percentage point decrease on the previous month and the lowest score since September 2007 (28%). Views about the future employment situation also continued to improve. The percentage of those believing there will be more jobs available in six months' time increased to 22%, with the number of those thinking there will be few available falling back from 62% in April to 57% in May.

....but the present situation remains gloomy
Consumers remain concerned about the current situation with little change in sentiment from the previous month. Just 6% of people think the current economic situation is good, with 77% believing it to be bad, although this is a slight improvement from April when 80% felt this way. Over a third (68%) of those questioned think there are currently few jobs available and just 20% believe there to be many jobs available at the moment.

Attitudes towards spending are mixed
The percentage of those believing now is a good time to make a major purchase fell to 39% during the month from 42% in April. Despite this fall, confidence remains high in this area when compared to the previous six months and is still much higher than at this time last year (14%). Confidence in making a household purchase, such as white or brown goods, saw a one percentage point decrease from the previous month to 41%. The number of those believing now is a bad time to buy such goods increased from 15% in April to 17% in May.

Expectations about house price falls over the next six months improved further in May. Consumers now expect prices to fall by 1.6% over the next six months, compared with 2% in April.