January 6, 2010 / 12:08 AM / 10 years ago

Consumer morale falls; job prospects up

LONDON (Reuters) - Consumer confidence suffered its sharpest fall in over a year in December, a survey showed on Wednesday, even as separate figures showed both job placements and wages rose last month.

Shoppers walk past a Christmas decoration reflected in a puddle in a street in London, December 18, 2009. REUTERS/Stefan Wermuth

The Nationwide Building Society’s consumer confidence index fell to 69 from an upwardly revised 74 in November, after respondents sharply scaled back their expectations for the coming year.

Nonetheless, the headline index is still significantly above the record low of 45 hit in January.

“An element of caution may have begun to creep back into the minds of consumers over the Christmas period,” said Martin Gahbauer, Nationwide’s chief economist.

“The looming VAT hike and other tax changes announced in the pre-Budget report may have impacted on confidence in December, forcing people to review their expectations for the future,” Gahbauer added.

Separate figures showed permanent job placements in Britain grew at their fastest pace in nearly two and a half years in December while salaries rose for the second month running.

The REC/KPMG index of permanent placements by recruitment agencies rose to 62.8 in December from 61.7 in November - the fifth consecutive month it has been above the 50 level that separates growth from contraction and the highest since July 2007.

But Bernard Brown, KPMG’s Head of Business Services, said the recovery in the job market could be stifled by cut backs in public spending after this year’s election to tackle the government’s ballooning budget deficit.

“The jobs market has been cushioned in recent years by continued public sector expansion,” he said. “If this is put into reverse post-election, it could have a significant effect on employment figures.”

Nationwide surveyed 1,014 people between November 23 and December 20, a period during which finance minister Alistair Darling published a pre-Budget report which sparked extensive media coverage of looming tax rises and spending cuts.

The bulk of the fall came in the expectations index, which fell eight points to 101. The spending index fell one point to 106 and the present situation component was unchanged.

A 13-month reduction in value-added tax to 15 percent expired on January 1, returning the standard rate to 17.5 percent.

The British Retail Consortium said on Wednesday that annual shop price inflation rose to a 13-month high of 2.2 percent in December and was likely to rise further following the VAT change.

Writing by Christina Fincher; Editing by Ron Askew

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