April 27, 2011 / 11:08 PM / 9 years ago

Consumer morale hits 2-year low on spending cut worries

LONDON (Reuters) - Consumer morale unexpectedly deteriorated in April to its gloomiest since the country was in the depths of recession, as people braced to take a hit from public spending cuts, a survey showed on Thursday.

The GfK NOP consumer confidence index fell to -31 in April from -28 in March, its lowest reading since February 2009, and confounding analysts’ expectations for a steady reading.

All five of the survey’s sub-indices are lower than they were both last month and a year ago.

The results are likely to reinforce concerns among the majority of Bank of England policymakers that raising interest rates too soon could derail the recovery.

The survey was conducted between April 1 and 10, just a week after finance minister George Osborne’s March 23 budget, which reaffirmed the biggest public spending cuts in a generation and unveiled downgrades to growth forecasts for this year and next.

GfK director Nick Moon said the figures were “bad news for the government and bad news for the economy” after official data on Wednesday showed the economy had stagnated for the last six months.

“It suggests that the attempts to spur growth in last month’s budget have failed to convince the public, and this may well be sorely felt on the beleaguered high street,” he said.

The sub-index gauging people’s expectations for their personal finances over the coming year fell to -14 in April from -10 in March, the lowest since January 2009. People’s outlook for the general economy fell to -30 in April from -29 in March.

The climate for major purchases index — which gauges Britons’ willingness to spend — fell to -31 from -29, its lowest since February 2009.

The index gauging Britons’ sentiment about their personal finances over the last year fell to -23 from -19 in March — the lowest since GfK started compiling the data in 1996.

Some major British retailers have complained about tough conditions as consumers face rising prices, higher taxes and muted wage growth, although discount retailers, like Primark (ABF.L) have reported a pick-up in trade in recent months.

“It is particularly striking that all five areas of the index fell this month, pointing towards growing gloom as we head into summer. These figures must make the possibility of a double-dip recession increasingly real,” Moon said.

Reporting by Fiona Shaikh; Editing by Catherine Evans

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