February 16, 2011 / 12:08 AM / 9 years ago

Consumer morale falls sharply in January - Nationwide

People walk past a Marks and Spencer store in Leicester November 4, 2009. REUTERS/Darren Staples

LONDON (Reuters) - Consumer confidence fell sharply in January to near its weakest level since early 2009, after a rise in sales tax dented shoppers’ willingness to spend, a survey by building society Nationwide showed on Wednesday.

Nationwide’s consumer confidence index declined to a seasonally adjusted 47 in January from 54 in December and just off November’s 20-month low of 46.

The spending component fell particularly steeply, dropping 20 points to 70. The expectations sub-index fell 10 points to 63 and the present situation component also weakened.

“Household confidence remained in the doldrums,” said Nationwide chief economist Robert Gardner. “Consumer perceptions are likely to have been dented by the rise in VAT and the upward pressure on inflation more generally.”

The government raised the rate of value-added tax on most goods and services to 20 percent in January from 17.5 percent, as part of an austerity drive that economists forecast will lead to very weak growth in household incomes this year.

Consumer price inflation is easily outstripping wage growth. It rose to 4 percent in January, its highest in more than two years, while annual wage growth has hovered around 2 percent.

Reporting by David Milliken; Editing by Susan Fenton

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