Confidence in economy falters as times get tougher

Consumers became increasingly pessimistic about the state of the economy and their own finances during December, research suggested yesterday.

People's confidence in their financial situation during the past 12 months dropped by five points during the month to stand deep in negative territory at minus 16, according to the GfK NOP Consumer Confidence Index.

Britons also feel downbeat about their prospects, with optimism about their financial situation during the coming year falling by one point to minus eight, well down on the plus three it stood at in December 2009.

Consumer confidence in the general economy for the past year fell five points to minus 51 during December, while expectations dropped by one point to minus 23, 17 points lower than a year ago.

The only measure of confidence that increased in December was the major purchase index, which jumped by 10 points to minus seven.

The increase was probably due to a combination of festive spending in the run-up to Christmas and people bringing forward major purchases before the January VAT increase to 20 per cent.

But the rise was enough to offset falls across the other four measures of confidence to keep the overall GfK NOP Consumer Confidence Index unchanged at minus 21, only two points lower than it was in December last year.

Nick Moon, managing director of GfK NOP Social Research, said: "At the moment consumer confidence is being propped up by one thing: a belief that the run-up to Christmas and the VAT hike is a good time for big-ticket retail purchases.

"This element of the index has distorted the overall index to make it appear static when in fact it is teetering on the brink. Every other measure has fallen and without this one positive, consumer confidence would have fallen to its lowest level in over a year."

n Six out of 10 Britons are worried that they will not have enough money to enable them to live comfortably during the coming year, a survey said.

About 57 per cent of people are concerned they will face a financial shortfall, while 37 per cent are worried about losing their job, according to the Samaritans.

Just over half of people also cited financial problems and debt as being one of their top five worries during 2010, followed by concerns about their health at 32 per cent and problems with relationships with family and friends at 30

per cent.

About 56 per cent of people are worried they will suffer directly during 2011 as a result of spending cuts to public services, while nearly a quarter of people with children are worried that they will lose their home.

Three out of 10 people said 2010 had been a bad year or even their worst year, up from 24 per cent who felt the same about 2009.