U.K. Consumer Confidence Rises Slightly

Sponsored Links

Consumer confidence in the United Kingdom rose in January, a survey showed on Wednesday, even as consumers became more wary about spending last month.

The Nationwide Building Society announced on Wednesday that the consumer confidence index rose to 73 in January from an upwardly revised score of 70 in December, beating economists' expectations for the index to stand at 70. It was also sharply higher than the score of 39 posted a year earlier.

However, consumers became more cautious about spending money during January with the spending index plunging 12 points to 96. The number of people who felt it was a good time to make a major purchase dropped to 32% in January from 35% in the prior month.

Nationwide said the sharp fall in the spending indicator was unusual, given that January was traditionally a strong month for household spending.

Martin Gahbauer, chief economist at Nationwide, suggested the fall could have been caused by the waning impact of the government's various stimulus measures, such as the reduced rate of VAT, the stamp duty holiday and the car scrappage scheme.

"Heavy discounting on the street and government driven initiatives, such as lower VAT, the car scrappage scheme and the stamp duty holiday, combined to keep the spending index buoyant throughout much of 2009," he said.

"The removal of these initiatives may now be causing consumers to reconsider parting with their cash at a time of year when we would normally expect to see high levels of spending confidence."

Retail sales in the U.K. grew just 0.3% in December compared to November, well below market expectations.

The present situation index rose to 23 in January from 20 in December, while the expectations index climbed to 107 from 103. Just over a third of surveyed respondents expect the economic situation to be better in six months' time, and 29% think there will be more jobs available.

Separately, a survey from the Recruitment & Employment Confederation and KPMG showed today that the U.K. jobs market was firmly on the recovery track.

Research among 400 recruitment and employment consultancies showed permanent staff placements in British firms increased for the sixth straight month in January, albeit at a slightly slower pace than December.

Temporary staff jobs also rose strongly, with the pace of expansion marginally below the previous month's two-and-a-half year high.

Kevin Green, chief executive of the Recruitment & Employment Confederation, said: "The labor market is out of intensive care but it is still in a fragile state. While employers are hiring more now than at any other time in the last year, the recovery is tentative and must not be put at risk by taxes or regulatory changes."

Britain's economy grew just 0.1% in the last three months of 2009, ending an 18-month recession but disappointing many analysts who had expected a much stronger rebound to growth.

The Bank of England holds its next Monetary Policy Committee meeting on Thursday, where it is widely expected to hold interest rates at 0.50% and continue its GBP 200 billion asset purchase scheme.

Consumer confidence in the United Kingdom rose in January, a survey showed on Wednesday, even as consumers became more wary about spending last month. (Market News Provided by RTTNews)