U.K. GfK Consumer Confidence Stayed Near Record Low in August

By Brian Swint

Aug. 29 (Bloomberg) -- U.K. consumer confidence stayed near a record low in August as the fastest inflation in a decade and falling house prices discouraged shopping, GfK NOP said.

An index of confidence, based on a survey of 2,001 people, rose 3 points from July's minus 39, which was the lowest since the data began in 1974, GfK said. While sentiment was lifted by the Olympic Games in Beijing this month, the U.K. index has declined from minus 4 a year ago, the report said.

``We have seen a small improvement in consumer confidence in August, but this should not be seen as a turnaround in core sentiment,'' Rachel Joy, a spokeswoman for GfK, said in a statement in London today. ``Winning gold medals in the Olympics appears to have had a lifting effect.''

The Bank of England kept the benchmark interest rate unchanged this month on concerns about inflation after the economy stagnated in the second quarter. Retail sales slumped to the lowest since 1983 this month, and house prices fell by the most in three decades, reports showed yesterday.

A measure of consumers' willingness to make big purchases fell by 1 point to minus 38, GfK said. Indexes covering household finances and the economy rose.

Responses to the survey after the start of the Olympics on Aug. 8 were on average 3 points higher than those before, Joy said. ``This, combined with summer holiday euphoria, may have helped lift consumers' perceptions of their personal situation and the general economy,'' she said.

Housing, Retail

House prices dropped 10.5 percent in August from a year earlier, the biggest decline since 1990, Nationwide Building Society said yesterday. An index of retail sales fell to the lowest since records began in 1983, the Confederation of British Industry said in a separate report.

The outlook for the economy may be limiting the ability of workers to ask for higher wages. The median pay increase in the three months through July was 3.5 percent, Industrial Relations Services said today. That compares with the July inflation rate of 4.4 percent, the highest since at least 1997.

Central bank policy makers split three ways on the direction of interest rates this month, with the majority voting to keep the rate unchanged at 5 percent. David Blanchflower, who favored a quarter-point reduction, said yesterday that the U.K. may already be in a recession and that he will support larger cuts in the future.

The next interest-rate decision is due on Sept. 4.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.