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Confidence 'Unrattled' But Brits Reported To Face 'Tough Times Ahead'

Aug 18, 2007
Views on Britain's financial outlook remained steady over the course of last month, according to new figures.

In Nationwide's latest Consumer Confidence Index, the public's optimism during July rose by one point from the same month last year to 96. The news comes despite concerns that recent flooding and attempted terror attacks in London and Glasgow, in addition to an interest rate increase by the Bank of England's monetary policy committee (MPC), would have a negative effect on consumer outlook. However, the financial services firm claimed that the latest figures "hardly" do much to reverse the first fall in confidence for six months which took place in June.

Within the index however, Britons were indicated to be feeling more positive about the future rather than current conditions. In the financial services firm's Present Situation Index, which judges opinions on the existing economic and employment conditions, the public views ranked at 98 points in July - the same figure recorded in the previous month. Optimism for the country's situation in six months' time increased by three up to 96, in comparison to the four-point fall recorded in June. Meanwhile, the Spending Index was reported to have remained unchanged from June to July as it stayed at 86. Despite this, consumers' desire to spend money was still said to be "slightly above" the current three-month average.

Commenting on the figures, Fionnuala Earley, chief economist for Nationwide, said: "Consumers' confidence does not seem to have been rattled by the events of the last month and remained broadly stable in July. However, falling disposable income, along with rising debt repayments, will mean that consumers will face tougher times ahead".

"The squeeze on their finances, strong chances of a further rise in rates, along with the effect of more widespread floods in the south of the country in the last couple of weeks, are likely to affect sentiment going forward. But it is comforting to see that consumer sentiment about the employment situation is holding up".

The index also revealed that the public's expectations for house price growth slowed over the course of the month. Consumers are now predicting property prices to increase by some 2.7 per cent over the next six months, in comparison to forecasts of a 2.9 percentage point rise recorded in June. With this figure also being down from the high of 4.5 per cent noted in May, July's statistics indicated the lowest level of predicted house price increases noted since June 2006. Ms Earley attributed this fall to the effect of five interest rate increases by the MPC over the 12 months "taking their toll" on consumers' day-to-day finances.

Last month, a Nationwide study revealed that property price growth curbed during July. Over the month, house prices increased by 0.1 per cent - the lowest change noted since April last year - after the three previous months each recorded double-digit progression. Although Ms Earley suggested that the MPC could wait before increasing the base rate this month, Howard Archer, chief UK and European analyst for Global Insight, claimed there is a "strong possibility" interest rates will rise to six per cent by autumn. Pointing to "growing affordability pressures", he reported that both first-time buyers and existing homeowners are struggling to make secured loan repayments.
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Steve Smith writes for 1 stop finance shop where visitors can apply for UK debt consolidation loans and also focuses on cheap personal loans and bad credit secured loans for UK residents.
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