Consumers’ confidence in spending fell at its fastest rate on record during January following the Government’s VAT hike.
Nationwide’s spending index dived by 20 points during the month to stand at 70, the lowest level since November 2008 when the UK was in recession, and the steepest drop recorded since the study began in 2004.
Just over half of people thought it was a bad time to make a major purchase, while 22 per cent also thought it was a bad time to buy household goods, up from just 15 per cent in December.
People’s attitudes towards the economy also deteriorated during the month, with drops in confidence about both the current and future economic situation recorded.
The expectations index fell by 10 points, with less than one in five people expecting the economy to improve during the coming six months.
Instead, 36 per cent think it will be worse than it is now, while 58 per cent think there will not be many jobs available going forward.
Nationwide said recent figures showing that the economy shrank during the fourth quarter were likely to have added to consumers’ concerns about the future economic outlook.
The present situation index was also two points lower at 23, with 67 per cent saying they thought the current economic situation was bad, 4 per cent more than in December. The overall consumer confidence index dropped by seven points to 47, almost completely reversing the bounce seen in December and leaving it just six points above its all-time low.