LONDON (Reuters) - Consumer morale fell to its gloomiest level in a year in June, the Nationwide building society said on Wednesday, as the outlook for the economy and household finances darkened.
Nationwide’s consumer confidence index dropped to 63 in June from 66 in May. Worse could lie ahead, given that the survey did not cover the period immediately after the Conservative-Liberal Democrat coalition’s austerity budget on June 22.
The coalition has announced hefty cuts to government spending and tax rises to try to bring down a record budget deficit, raising fears that Britain’s fragile economic recovery will struggle to gain momentum.
“It will not be until July’s results ... that we could potentially see what impact the Chancellor’s (finance minister George Osborne) package of austerity measures has had on confidence,” said Nationwide chief economist Martin Gahbauer.
Despite the fact that Britain’s economy has now emerged from an 18-month recession and that unemployment has not risen as high as feared, consumer confidence has failed to pick up.
Many Britons are tightening their belts in order to pay down debts and others are struggling to get hold of credit as banks rebuild their defences following the financial crisis, meaning fewer people have cash to spend on the high street.
Nationwide’s spending index — which measures sentiment about buying household goods and big ticket items — fell five points to 95 in June, the lowest since January 2009.
Expectations for the economy, labour market and household income over the next six months are also on the decline, according to Nationwide. Its expectations index fell to 88 last month from 94 in May — the lowest since May 2009.
The survey of 1,000 people was carried about between May 24 and June 20.