Consumer confidence dives to 15-year low, survey shows

Consumer confidence fell to its lowest level since February 1993 during March, a survey showed on Friday.

The latest data from GfK NOP show all five measures fell, with the overall index down eight points – the seventh consecutive monthly fall.

Rachael Joy at GfK NOP said: “Confidence again continues its downward trend for the seventh month in a row.

With news reports of possible recession in America, fears of recession in the UK, and stock market fluctuations, the consumer’s gloom continues to grow. We will see if the budget announcements this month improve the mood of the consumer over the next few weeks.”

The falls in confidence come despite two interest rate cuts from the Bank of England in December and February, with banks seemingly unable to pass on rate cuts to borrowers amid the credit crunch.

The index measuring economic outlook fell three points, as did feelings for people’s personal financial situation of the last 12 months, dipping to the lowest level since April 1993.

Amid the gloom, the savings index – measuring whether people feel it is a good time to save – fell three points and is ten points lower than March 2007, suggesting the pressures of rising prices is making people unable to put money aside.

Howard Archer, chief UK economist at analysts Global Insight, explained the fall in consumer confidence will put more pressure on the Bank of England to cut interest rates in April.

“The further drop in consumer confidence to a 15-year low in March does not bode at all well for consumer spending,” he said.

“While there is not always a close relationship between consumer confidence and actual spending, it does seem highly likely that consumption will be dampened over the coming months by muted real disposable income growth, tighter lending conditions, a substantially softer housing market, lower equity prices and increased debt levels.

He added: “News consumer confidence is now at a 15-year low reinforces the pressure on the Bank of England to cut interest rates again before too long.

“Indeed, we believe there is a strong chance the Bank of England will trim interest rates by a further 25 basis points to five per cent in April as current markedly tighter credit conditions heighten the downside risks to growth.”