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UK consumer confidence index declines nine points in April

April's slump wipes out March's rare rise in optimism.

The UK consumer confidence index declined by nine points in April to 44, erasing the gains recorded a month earlier, according to a survey of 1,000 people conducted by the Nationwide Building Society in conjunction with the research firm TNS‐RI.

The survey, carried out between 26 March and 22 April, revealed that the main index is more than 30 points below its long-run average. 

The present situation index, which reflects sentiment about the current economic and employment situation, declined by three points to 21.

The spending index, which reflects sentiment about spending on household goods and major purchases, declined by 11 points to 75 per cent in April. The percentage of consumers who believe now is a good time to make a big purchase dropped marginally to 22 per cent.  

The expectations index, which reflects sentiment about the economy, labour market and household income over the next six months, declined by 13 points to 60.

Nationwide anticipates that news of recession may dent confidence in May, while the Queen’s jubilee and the Olympics are likely to lift spirits over the summer. However, Robert Gardner, Nationwide’s chief economist, warns that whether or not these short‐term fillips translate into a sustained upturn in confidence will "depend on the performance of the wider economy and whether any recovery quickly filters through into improved labour market conditions".

Gardner said:

It is not surprising that confidence remains fragile, with the economy shrinking over the past six months and labour market conditions still weak. The main bright spot for households over the past six months has been the sharp decline in inflation from 5.2 per cent last September to 3.5 per cent in March, which has helped to provide some support to purchasing power.

Unfortunately, the sharp falls in inflation seen at the start of the year are unlikely to be repeated in the near- term, with inflation likely to fall back towards the 2 per cent target only slowly. As a result, the easing price pressures will be less visible to households in the months ahead than at the start of the year.