Consumer confidence falls further in June
Consumer confidence fell for the second month running in June and now stands at 63 points - a similar level to 12 months ago, and 21 points below February's interim peak.
Faith in the present situation rose slightly during June, with the Present Situation Index the only one to see an increase over the month, albeit slight. The Expectations and Spending Index both fell back in June reaching their lowest levels since May 2009 and January 2009 respectively.
There was a small fall in consumers' optimism towards the housing market in June, with consumers expecting the value of their home to increase by 0.7% over the next six months. This is a decrease of three tenths of a percentage point from May's figure.
Martin Gahbauer, Nationwide's chief economist, said: "The downward trend that we have seen in recent months extended into June as consumers continued to express caution towards the future situation. With the emergency Budget taking place late in the month, this lack of optimism may have been a product of consumers hypothesizing over how the new Chancellor would address the UK's budget deficit. It will not be until July's results, however, that we could potentially see what impact the Chancellor's package of austerity measures has had on confidence. With the coalition government now established and greater clarity about future fiscal plans, it may be that we begin to see confidence stabilise somewhat in the coming months following a period of political uncertainty.
Expectations drop to their lowest level for over a year
"The Expectations Index underwent a strong rally in the second half of 2009 and during the first two months of this year, however we have now seen four months of rapid decline bring the index down by 32 points since its February high. This shift can largely be credited to renewed pessimism in the future economic situation, but there does also remain noticeable concern about the state of the job market. At 53%, the number of people who believe there will be not many or few jobs available in six months' time reached its highest level this year. This compares to 61% who believe there are currently not many or few jobs available. These concerns are perhaps unsurprising with unemployment figures remaining close to record highs and fears over public sector jobs continuing to grow.
The state of the economy is still a concern for many...
"The emergency Budget is just one of a number of news stories that will have been on the minds of consumers during June, with the BP crisis, BA Union strikes and the continuing sovereign debt crisis in the Eurozone dominating headlines. These will have done little to boost sentiment among consumers and faith in the current economic situation remains close to its record low. Just 6% of consumers believe the current economic situation to be good, while those who believe it to be bad crept up to 72% during the month.
...while spending confidence falls despite World Cup buying
"Official figures showed UK retail sales fell during June despite the onset of the World Cup, which can so often create a flurry of activity on the high street as consumers stock up on food, drink, and new televisions. However, concerns over what was to come out of the emergency Budget may well have led to a more cautious approach to spending during June. By historical levels, confidence in spending remains relatively high. With news that VAT will increase from January and that the Bank of England base rate is likely to remain unchanged over the coming months, consumers may feel encouraged to spend more over the second half of this year. Nonetheless, consumer willingness to spend remains part of a fine balancing act with the employment situation and levels of disposable income."