U.K. Consumer Confidence Increased to Six-Month High in May

By Jennifer Ryan

June 3 (Bloomberg) -- U.K. consumer confidence increased in May to the highest level in six months as shoppers became more hopeful that the economy will emerge from recession, Nationwide Building Society said.

An index of sentiment rose 2 points to 53, Britain’s biggest customer-owned lender said in an e-mailed statement today. It based the report on a survey of 1,001 people taken from April 20 to May 17.

The Bank of England may decide tomorrow not to expand its plan to aid the economy with newly created money for now as evidence emerges that the recession is easing. Other data this week showed mortgage approvals rose to the highest in a year and house prices stopped falling for the first time in 20 months.

Consumers “appear to be much more confident about the future,” Martin Gahbauer, chief economist at Nationwide, said in the statement. “As we continue to see contrasting news about the state of the economy, it is likely that confidence will remain fragile.”

A gauge of consumers’ expectations for the future rose 5 points to 76, while a measure of their willingness to make a major purchase climbed by 1 point to 101, Nationwide said. The index of attitudes on the present situation fell to 17 from 21.

Mortgage Lending

Shoppers were more willing to add debts on their credit cards in April, raising net consumer credit by six times from the previous month to 314 million pounds ($519 million), the Bank of England said yesterday. It also said that banks granted 43,201 home loans in April, up from 40,038 in March.

Other data have signaled improvement in the housing market. Hometrack Ltd. said on June 1 that its survey of real-estate agents showed average house prices in England and Wales held at 155,600 pounds in May after falling 0.3 percent in April. A Nationwide report last week showed home values jumped by the most since 2007.

The labor market shrank at a slower pace in May, KPMG and the Recruitment and Employment Federation said in a separate report. A measure of permanent staff appointments by job consultants increased to 41.7, the highest in 10 months, from 37.3 in April. Results below 50 indicated contraction.

The Bank of England will tomorrow probably leave the key interest rate at a record low of 0.5 percent, according to all 61 economists in a Bloomberg News survey. All but two of 39 economists forecast the bank will refrain from expanding its plan to pump new money into the economy from the current 125 billion pounds.

Shop-price inflation eased to 1.3 percent in May from 1.4 percent the previous month, the British Retail Consortium said in a separate report today. Annual gains in food prices fell to 6.4 percent, the slowest this year, from 7.9 percent the previous month.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net