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Consumer confidence falls

Published:: 26 November 2007
Topic:: News,Money

Rising oil and food prices plus increased mortgage payments have hit consumer confidence...

A record number of consumers believe prices rose in 2007 and are set to rise further in 2008. Some 73% say prices rose in the last 12 months and 81% expect prices to rise in the coming year.

Similar worries affect consumers' views on employment - despite official data suggesting things are not as bad as they think.

The Lloyds TSB Corporate Markets survey of 2,000 people in November found the balance of consumers believing employment conditions are better than 12 months ago, rather than worse, fell to -27% in November, the lowest rate in a year. Yet official labour market data remained robust in October.

Despite concerns about prices and possibly because employment prospects have taken a knock, an increasing number of consumers believe interest rates will fall next year. The balance of respondents expecting interest rates to be higher rather than lower dropped to 43%, from 53% in October.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, says: "A record number of consumers are feeling the pressure of higher prices and this, together with worsening employment prospects, is clearly having a negative impact on consumer spending.

"But as consumers struggle to pay their bills, we expect demand for higher wages to increase - official data showed wage growth hit a six-month high in September.

"It's now pretty much expected - by economists and consumers alike - that the Bank of England will begin to cut interest rates in coming months. But if prices continue to rise next year, as consumers predict, this will come as little relief to many household budgets."

DISCLAIMER: Please note that any rates or deals mentioned in this article applied at the time of writing and may no longer be available/applicable today.