UK consumer confidence deteriorated to a record low in November despite lower fuel and food prices and a massive rate cut, a survey showed Wednesday. Indications of recession, rising unemployment and ongoing financial instability led to this weakness.
The latest survey from the Nationwide Building Society revealed that consumer confidence dropped 6 points to 50 in November. This was the lowest reading since the survey began in May 2004.
Nationwide's chief economist, Fionnuala Earley said, "Consumer confidence dropped again this month against the backdrop of an emerging recession in the UK and continued global economic uncertainty. Reports of job cuts have almost certainly impacted on sentiment about the present and future employment situation, causing purse strings to tighten further, even as the festive season gets underway."
The present situation index, reflecting sentiment about the current economic and employment situation dropped 5 points to 30 in November, while the indicator measuring expectations about the economy, labor market and household income over the next six months eased to 63 from 70 in October.
Meanwhile, the only sub-indicator that strengthened in November was spending index. Consumer's willingness to spending moved up to 64 from October's 56. This was driven by heavy discounting on the high street as shoppers start to prepare for Christmas.
Around 49% of consumers think there are few jobs available, up from 41% last month. Although consumers assess that few jobs are available, the majority think they would be unaffected, with nearly two thirds believing their household income would remain the same in six months time.
Expectations about house prices over the next six months improved slightly in November. Consumers now expect house prices to fall 5.4% over the next six months.
Tomorrow, the Bank of England is expected to cut its key interest rate to 2% from 3%. To alleviate the mounting pressures on economy, policymakers of BoE had unanimously voted to reduce its key interest rate by 1.5 percentage points to 3% in November.
Elsewhere, a survey conducted by Markit and Chartered Institute of Purchasing and Supply reportedly showed that the service sector activity contracted in the UK. The Purchasing Managers' Index for the service sector dropped to 40.1 in November, the lowest level since the survey started in 1996. Economists were expecting the indicator to fall to 41.2 from 42.4.
The UK CIPS PMI for the construction sector had declined to 31.8 in November from 35.1 in October. Meanwhile, the manufacturing PMI slid to the lowest since data was first collected in January 1992.
The British Retail Consortium announced that the BRC-Nielsen shop price annual inflation slowed for the third straight month to 2.7% in November. Shop price inflation eased mainly due to a decline in food price inflation to 7.1% and non-food price inflation to 0.4%.
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