Consumer confidence remains stable as Christmas nears

The Nationwide Consumer Confidence Index remained unchanged for the second consecutive month in November, staying level at 73 points. Notably, the Present Situation Index saw a small fall in November following recent monthly increases - dropping two points to 20 from a six month high of 22 points recorded in October. By contrast, the Expectations Index increased by one point to 108 during the month, following a three point fall in October. The Spending Index also recorded an increase in November, rising two points to 106.

Expectations about house price rises over the next six months moderated in November. Consumers now expect the value of their home to increase by 1.0% over the next six months, compared with 1.5% in October.

Martin Gahbauer, Nationwide's chief economist, said: "Confidence remained stable for a second consecutive month in November suggesting that consumer sentiment is holding steady at the end of a volatile year for the index. At the beginning of 2009 we saw consumer confidence drop to record lows, but we have since seen this index return to pre-recession levels. In the last few months, consumer confidence has lost some of the upward momentum evident earlier in the year, and this is largely due to ongoing pessimism about the current economic situation rather than expectations for the future. The downbeat assessment of the present situation is consistent with recent news that the UK has been slower to come out of recession than other countries. However, expectations for the next six months have not abated and remain at a high level."

Increased belief that now is a good time to spend

The Spending Index increased by two points to 106 in November, keeping it above the 100 point level for the tenth consecutive month. As there was no change in confidence to purchase household goods, this uplift can be credited to improved confidence to make major purchases. While there is clearly a view among consumers that now is a good time to spend, it is perhaps surprising that there was not a larger increase in positive spending sentiment in November ahead of the VAT rate reverting back to 17.5% from 1 January 2010. Nonetheless, the number of people who believe now to be a bad time to make a major purchase fell by three percentage points to 34% - the lowest level it has reached since April 2006.

Confidence in the present situation falls back slightly...

While there was a return to double digits (10%) in October for the proportion of consumers who believe the current economic situation to be good, this fell back by three percentage points to 7% in November. There was little change in sentiment towards the current employment situation during the month, however the number of people who believe there to be not many or few jobs available increased by one percentage point to 67%.

...but confidence in the future economic situation remains strong

Of those questioned during November, 84% believe that the economic situation will be the same or better in six months' time - an increase of 1% from October. Just 14% now believe that the economic situation will be worse in six months' time. This is the lowest level it has reached since the index began (May 2004). The number of people who believe that their household income will be higher in six months' time fell to 15% during the month, down from 17% in October. However, the percentage of those who believe it will be the same increased by two percentage points, reaching its highest ever level at 73%.