The mutual’s research showed that confidence in spending power in January slumped to its lowest level since November 2008.
This left Nationwide’s consumer confidence index in January just six points above its all-time low, with belief in the current situation hovering around the same mark for the last two years.
Less than one in five consumers believe that the country’s economic situation will improve over the next six months. Expectations in the future have been a key driver in falling confidence over the last 12 months, with households’ outlook highlighting that they understand economic recovery will remain rocky.
Nationwide found that consumers believe the housing market will remain sluggish, with house prices expected to fall 1.1% over the next six months, up from the expected fall of 0.9% in December.
Robert Gardner, chief economist at Nationwide, said: “The fact that the index fell during the month is not surprising, when we consider the influences that will have impacted on consumer sentiment during the survey field dates.
“Consumer perceptions are likely to have been dented by the rise in VAT and the upward pressure on inflation more generally, with rising prices for petrol and other essentials likely to have been recorded during the month. This will have put further pressure on household budgets in January.
“Such a squeeze on purchasing power could also explain the record fall in the Spending Index, which slumped to a level last seen during the depths of the recession.”
Gardner added that figures showing the economy shrank a shock 0.5% in Q4 last year will fuel consumers’ concerns about the future.
He added: “In the quarters ahead, we expect business investment and trade to lead the recovery and this will gradually feed through to households through stronger employment and income growth.
“Nonetheless, it is likely to take time for the feel good factor to filter through and it may be some months before we see significant positive movements within the consumer confidence index.”
