U.K. Nationwide Consumer Confidence Falls to Lowest Since 2004
U.K. consumer confidence fell to the lowest in at least four years in April as the weakening housing market and higher living costs depressed shoppers, Nationwide Building Society said.
An index of sentiment taken from the responses of 1,000 people declined seven points to 70, the lowest since the survey began in May 2004, Britain's fourth-biggest mortgage lender said today in an e-mailed statement.
Home values had the first annual decline since 1996 last month after banks curbed mortgage lending to the lowest in nine years, Nationwide's house-price index showed a week ago. The Bank of England, which has cut the benchmark interest rate three times since December to avert a recession, may leave it unchanged tomorrow to keep inflation under control, economists say.
“Food and fuel prices remain high and with house prices no longer rising, it is unlikely that consumer confidence will pick up very quickly,'' Fionnuala Earley, Nationwide's chief economist, said in a statement. “Inflationary pressures mean the Monetary Policy Committee will probably prefer to cut rates at a more gradual pace than many would prefer.''
An index of sentiment on consumers' present situation dropped nine points to 65, and the gauge of their future situation declined five points to 74. A measure of willingness to make a major purchase fell two points to 65.
House prices declined in April by 1 percent from a year earlier, Nationwide said April 30. Rival HBOS Plc, the nation's biggest mortgage lender, said May 2 that prices fell 0.9 percent on the year, which was also the first drop recorded since 1996.
Loan Approvals
Mortgage approvals fell in March to 64,000, the lowest level since records began in 1999 and half the level of 1 1/2 years ago, the central bank said April 29. The International Monetary Fund forecasts U.K. economic growth of 1.6 percent in 2008, the least since the end of the last recession 16 years ago cheap payday loans.
The labor market deteriorated last month, accountancy firm KPMG and the Recruitment and Employment Confederation said today. An index measuring placements of permanent staff fell in April after rising in March, while hiring of temporary workers increased.
“Employers are shifting away from hiring permanent staff into a more temporary workforce as a way of dealing with the current economy uncertainty and financial crisis,'' Alan Nolan, director at KPMG, said in a statement.
Concern about inflation left the central bank's rate-setting committee with its first three-way split in almost two years last month. Timothy Besley and Andrew Sentance wanted no rate change, while David Blanchflower favored a bigger cut than the quarter- point approved by the majority.
Crude Oil
Crude oil rose to a record above $122 yesterday, and United Nations figures showed food was 57 percent more expensive globally in March than a year earlier. Inflation will accelerate from the current 2.5 percent to exceed the government's upper limit of 3 percent, Bank of England Governor Mervyn King said last week.
All but five of 61 analysts surveyed by Bloomberg News predict the central bank will leave the key rate unchanged tomorrow. The rest forecast a quarter-point cut. The bank announces the decision at noon in London.
George Buckley, chief U.K. economist at Deutsche Bank AG in London, changed his interest-rate forecast yesterday to predict a quarter-point reduction this week from the current 5 percent.
“Survey evidence suggests the economy isn't as resilient as we thought it might be,'' Buckley said in an interview on Bloomberg Television. “The housing market is weakening quite sharply, and that can be the catalyst for much weaker consumption than we've seen so far.''