Consumer mood brightens for first time this year

LONDON (Reuters) - Consumer confidence rose last month for the first time this year as falling petrol prices and a government-backed rescue package for the banking sector lifted morale, a survey showed on Wednesday.

The Nationwide building society's consumer confidence index rose to 55 from a series low of 51 in September. Movements in confidence over the month showed a particularly sharp increase following the government's announcement of support to major banks.

Britain injected 37 billion pounds of taxpayers' cash into three major banks on October 13 and offered unprecedented support to get the financial system functioning again.

The survey's findings will provide some cheer to Prime Minister Gordon Brown, whose handling of the banking crisis has allowed him to recover some lost ground in opinion polls. A general election must be held by mid-2010.

"The actions taken by the government and the Bank of England to support financial markets do seem to have buoyed consumers' confidence," said Fionnuala Earley, Nationwide's chief economist.

"However, with the economy heading into recession, it is likely to be some time before confidence returns to the level of a year ago."

A breakdown by sector showed improvements in consumers' spending confidence and expectations about the future, helped by the Bank of England's half-point interest rate cut last month and expectations of more to come. However confidence in the present economic situation fell, reflecting a barrage of gloomy headlines and the growing likelihood of recession.

Expectations about house prices also deteriorated in October with consumers forecasting prices would drop by 5.6 percent over the next six months, more than the 4.9 percent drop they predicted in September.

(Reporting by Christina Fincher; Editing by Victoria Main)