Credit conditions affecting consumer confidence : Credit Card Guide

Credit conditions affecting consumer confidence

According to a recent report the effects of the global credit crunch have really started to take their toll in terms of consumer confidence levels in the UK.

The report suggests that consumer confidence fell at the fastest pace in three years last month, reflecting the effects of rising living costs and the credit crunch. Concerns over a slowdown in the economy have resulted in the Bank of England reducing the interest rate following December's Monetary Policy Committee meeting.

The Nationwide Building Society confirmed that its consumer confidence index plummeted from 90 in October to just 86 for November. The survey was introduced in 2004, and this reflected the largest drop yet since it came into operation. The consumer confidence index is now at its lowest level since the beginning of the year.

Fionnuala Earley, Nationwide's chief economist, stated: "Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation."

The drop in consumer confidence does not bode well for retailers, who could stand to lose millions of pounds in the run up to Christmas if consumers do not increase their spending. However, although interest rates have fallen many are still struggling with their mortgage repayments, and with the wheels of the credit industry grinding to a half for some people, due to the credit problems, the situation may be set to get worse.

Adding pressure is a recent announcement that energy prices may soar again in the New Year, which could further impact on household income, adding to the strain on those already struggling with their finances.

Tom Smith
10th December 2007

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