U.K. Consumer Confidence Declined to Four-Year Low in December

By Svenja O’Donnell and Brian Swint

Jan. 6 (Bloomberg) -- U.K. consumer confidence fell to the lowest since at least 2004 in December as the recession deepened and unemployment rose, Nationwide Building Society said.

An index of sentiment fell four points from a month earlier to 47, the worst since the survey began four years ago, the mortgage lender said in a statement today. The reading, taken from a survey of 1,000 people between Nov. 17 and Dec. 14, compares with 84 points a year earlier.

The Bank of England will probably cut the benchmark interest rate further this week after reducing it in December to 2 percent, the lowest since 1951, economists say. Prime Minister Gordon Brown plans to unveil new measures to bolster the economy as it endures its first recession since 1991.

“Consumers’ confidence fell sharply in 2008, driven mainly by their sentiment about the economic and labor market situation,” said Fionnuala Earley, chief economist at Nationwide, in the statement. “As the U.K. enters recession it is likely to be some time before we see confidence returning.”

Nationwide’s index of consumers’ future expectations declined four points to 60 points in December, and a measure of sentiment on the current situation declined two points to 28. A gauge of willingness to spend rose to 82 from 66, as stores stepped up discounting to attract shoppers.

Britain’s economic prospects are worsening as shrinking growth lead companies to cut staff. The economy contracted 0.6 percent in the third quarter, and consumer spending dropped the most since 1995. Unemployment rose at the fastest pace since 1991 in November.

The U.K. central bank will probably cut the benchmark interest rate by a half point to 1.5 percent on Jan. 8, according to the median forecast of 57 economists in a Bloomberg News survey.

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Brian Swint in London at bswint@bloomberg.net