Consumer morale saw a limited recovery in March, according to new figures from Nationwide Building Society.

Nationwide’s consumer confidence index, which uses survey results to assign a scaled numerical
value to consumer morale and expectations, was measured at 39 in February – the lowest in the
survey’s history. In March, this increased slightly to 44.

The current index figures are still far below the survey’s long-term average of 80. Nationwide’s chief
economist Robert Gardner said: “We will need to see a succession of increases before we can say
that confidence has returned anywhere close to pre-recession levels.”

Retailers are suffering from a number of factors that have combined to make consumers less likely
to spend – including higher sales taxes and inflation at more than double the Bank of England’s 2 per
cent target. In March, retail sales fell at the fastest rate in the last 16 years.

Poor sales helped fuel a shock economic contraction in the last quarter of 2010, and the year so
far has seen limited expansion despite the Chancellor’s self-proclaimed “Budget for Growth” last
month. This makes it likely that the Bank of England may continue to hold interest rates at 0.5 per
cent in May, as they have clearly stated their intention to see signs of economic recovery before
increasing the cost of borrowing.

Other aspects of Nationwide’s survey indicated that consumers were more optimistic about the
future, however, with the measure for their expectations about the wider economy increasing from
51 to 60. The spending component, which measures appetite for buying household goods and other
major items, also increased from 53 to 66.

Mr Gardner said: “This is the first increase in spending sentiment since the introduction of the 20
per cent VAT rate in January – perhaps an indication that consumers are adjusting to the impact this
is having on their own finances.”

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