U.K. Consumer Confidence Dropped in July to Lowest in 15 Months

U.K. Consumer Confidence Dropped in July to Lowest in 15 Months


Aug. 11 (Bloomberg) -- U.K. consumer confidence dropped in July for a third month, plunging to the lowest since the aftermath of the economy’s worst quarterly contraction in three decades last year, Nationwide Building Society said.

The index of sentiment slumped 7 points from the previous month to 56, the customer-owned lender said in an e-mailed statement today. The result was the lowest since April 2009. A measure of expectations for the economy fell 13 points to 76.

The biggest budget cuts since World War II, faster inflation and resilient unemployment have undermined consumer confidence. Reports today may show the Bank of England cut its forecasts for economic growth and jobless benefit claims fell the least in six months in July, surveys of economists show.

“July will have been a time for many consumers to reassess their individual circumstances following the Chancellor’s emergency budget,” Martin Gahbauer, chief economist at Nationwide, said in the statement. Faster inflation “may now be leading to more negative sentiment among consumers as they start to feel the pinch on their spending power.”

Nationwide’s measure of shoppers’ assessment of their present situation was unchanged at 25, and a gauge of their willingness to make major purchases dropped 3 points to 93. The overall measure of confidence is down from the high this year of 84 in February.

Budget Deficit

Prime Minister David Cameron said last week that budget cuts to tackle the record deficit won’t be reversed when the economy recovers. Gross domestic product expanded 1.1 percent in the second quarter from the first three months of the year, the fastest pace in four years.

Today’s report showed consumers are the most pessimistic since enduring the economy’s 2.3 percent slump in the first quarter last year, the worst since 1979, as their cost of living rises while unemployment lingers. Consumer prices rose an annual 3.2 percent in June, above the government’s 3 percent limit.

Unemployment measured by International Labour Organization methods was 7.8 percent in the quarter through June, according to the median prediction of 22 economists in a Bloomberg News survey. Jobless benefit claims probably fell by 17,000, the median of 27 forecasts shows. The Office for National Statistics will publish the data at 9:30 a.m. today in London.

The Bank of England last week held its key interest rate at a record low of 0.5 percent and its bond-purchase program at 200 billion pounds ($315 billion) as policy makers assess the strength of the recovery. Governor Mervyn King told lawmakers last month officials must “keep our foot firmly on the accelerator.”

The bank will announce its latest economic projections at 10:30 a.m. in London. Fourteen of 16 economists surveyed by Bloomberg News forecast the bank will cut its 2011 growth forecast today. Two said it will lower the 2010 forecast, 10 predict no change and four expect an increase.

source: bloomberg.com