Rising shop prices and a weak housing market caused consumer confidence to dive in March, it was claimed on Wednesday.

The Nationwide consumer confidence index fell one point to 77 in March, new figures reveal, to its lowest level since the building society’s research started four years ago.

Just 14 per cent of people believe the economy will improve in the next six months and only 38 per cent believe future employment levels are positive.

“The downturn in consumer confidence over the last six months is not surprising given developments in the financial markets and a weakening housing market,” said nationwide chief economist Fionnuala Earley.

“The effect of recent interest rate cuts has yet to trickle through to people’s pockets, particularly as food and energy costs are still high.

“Consumers may begin to feel more comfortable following the expected cut to rates this week, but it is unlikely that confidence levels will increase in the short term.”

However, Britons’ desire to spend rose – with the spending index up three points – with the number of people thinking it is a good time to make a major purchase rising 14 per cent.

Most people feel their household incomes will rise, but the number predicting an income fall rose from seven per cent in September to 12 per cent in March.

In the housing market – despite reports of double digit house prices falls over the next two years – property prices are forecast to rise 0.4 per cent compared with expectations of 1.1 per cent falls in February.