BARC Charts

UPDATE 2-UK consumer confidence lowest since March 2003-GFK
Thursday 29 December 2005, 10:53am EST
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By Sumeet Desai

LONDON, Dec 29 (Reuters) - British consumer confidence fell in December to its lowest level since the start of the Iraq war more than two years ago, a survey showed on Thursday.

Consultancy GfK NOP said its barometer of consumer sentiment fell to -9 in December after a reading of -8 in November. That was the lowest point since March 2003 and confounded analysts' predictions of a rise to -6.

"At the headline level at least, this release does not paint a very bright picture of conditions in the consumer sector," said George Johns, economist at Barclays Capital.

The deterioration over the month was driven by the index measuring whether it was a good time to make major purchases which fell three points to +2.

The sub-indices measuring both people's perceptions of their own finances and that of the general economic situation over the next 12 months also fell slightly, by a point to +7 and -20 respectively.

This was perhaps unsurprising since December's economic headlines were dominated by news that Chancellor of the Exchequer Gordon Brown had to nearly halve his growth forecasts for 2005.


HAPPY NEW YEAR?

But some economists said signs of renewed life in the housing market may lead to a pick-up in consumer spending in 2006 after a sharp slowdown at the start of this year.

Data from the British Bankers' Association earlier on Thursday showed mortgage approvals -- loans agreed but not yet made -- had risen 51 percent on the year in November.

"Overall we still believe the recovery in the housing market will start to boost household confidence and spending," said Dominic Bryant at BNP Paribas.

Conditions may already be improving after a retail slowdown in 2005 exacerbated by soaring petrol and fuel bills and an end to the house price boom which had fuelled a borrowing binge.

The John Lewis department store chain on Wednesday said sales rose 11.7 percent on the year in the four weeks leading up to Dec. 24, boosted by an extra shopping day before Christmas.

Meanwhile, many retailers have reported a brisk start to the start of the post-Christmas sales. Data compiler Footfall said the number of people out shopping in the first two days after Christmas was up 8 percent on the year.

Bank of England policymakers, however, are likely to want to wait until the volatile New Year shopping season and annual pay rounds out of the way before changing interest rates from their current 4.5 percent.

One Monetary Policy Committee member voted for a rate cut earlier this month in order to boost growth but the majority seemed content with the current policy stance, preferring to wait for more data.