Nationwide research revealed that consumer confidence in June dropped to 63 points compared to 66 points in May and down 21 points on the interim peak seen in February.
Consumer fait in the housing market remained fairly stable in June with only a small fall recorded, while homeowners expect the value of their home to increase by 0.7% in the next six months, down 0.3% on May.
Martin Gahbauer, chief economist of Nationwide, said: “The downward trend that we have seen in recent months extended into June as consumers continued to express caution towards the future situation.
“With the emergency Budget taking place late in the month, this lack of optimism may have been a product of consumers hypothesizing over how the new Chancellor would address the UK’s budget deficit.”
Gahbauer said it would not be until July’s results that it would become clear what impact the Chancellor’s package of austerity would have on confidence: ” With the coalition government now established and greater clarity about future fiscal plans, it may be that we begin to see confidence stabilise somewhat in the coming months following a period of political uncertainty.”
However, consumer expectations for the economy, labour market and household income over the next six months dropped to its lowest level for over a year, falling 32 points from its February high to 88 as pessimism over the economy took hold. Thos who said the economy is in a bad state crept up to 27% in June.
Just over half (53%) of people believe there will be few jobs available in six months time, its highest level this year, while 61% said there are currently few jobs around.
The World Cup also failed to help retail sales, which fell during June, as concerns over the Budget has led many consumers to be more cautious over spending.
Neverthless, Gahbauer noted that confidence in spending still remains relatively high historically and people may be encouraged to spend more in the second half of the year due to the VAT increase in January next year and the fact the base rate is likely to remain unchanged in the near future.
He added: “Consumer willingness to spend remains part of a fine balancing act with the employment situation and levels of disposable income.”
