February 16, 2012 / 6:46 AM / 8 years ago

Consumer morale hits 5-month high

LONDON (Reuters) - Consumer confidence rose in January to its highest level since August as people’s view of the outlook six months ahead grew more upbeat, a survey by lender Nationwide showed on Thursday.

Shoppers walk along on Oxford Street ahead of Christmas weekend in London, December 23, 2011. REUTERS/Finbarr O'Reilly

The improvement in consumer morale supports the Bank of England’s view that consumption will help underpin the economy later this year as a fall in inflation eases the squeeze on household budgets.

Nationwide’s headline consumer confidence index climbed to 47 from 38 in December, which was the second-lowest reading since the survey started in 2004.

“A number of other economic indicators have also surprised and been more positive than expected in recent weeks, which may be an indication that underlying economic conditions are not as weak as feared,” said Robert Gardner, Nationwide’s chief economist.

A string of unexpectedly strong business surveys have soothed concerns that Britain’s economy is about to fall back into recession.

The expectations component of the Nationwide index rose to 64 from 50, the highest level since August. The spending index - which reflects consumers’ view of whether this is a good time to buy a house, a car or other major goods - edged up to 78 from 77, and the present situation index firmed to 21 from 19.

Weak consumption has been a major reason behind Britain’s disappointing growth in the past year, as the government has reined in spending and households have grappled with falling real wages and rising unemployment.

“Renewed hope that the UK will avoid a double-dip recession may support sentiment, especially since the downward trend in inflation is set to continue through 2012,” Gardner said.

“But with the UK recovery likely to remain weak in the first half of the year, a significant and sustained rise in consumer confidence remains unlikely in the near term.”

The survey was conducted from December 26 to January 22 and covered 1,000 people.

Reporting by Olesya Dmitracova; Editing by Hugh Lawson

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