U.K. Consumer Confidence Rose to the Highest in a Year in July

By Brian Swint

Aug. 5 (Bloomberg) -- U.K. consumer confidence rose to the highest level in more than a year last month as house prices stopped falling, Nationwide Building Society said.

An index of sentiment climbed to 60 in July, the highest since May 2008 and up from 59 in June, Britain’s biggest customer-owned lender said in an e-mailed statement released today. TNS surveyed 1,000 people for Nationwide between June 22 and July 19.

The figures add to evidence that Britain has passed the worst of the recession. Bank of England policy makers tomorrow will decide whether the recovery is strong enough after five quarters of contraction for policy makers to ease off on their program of buying bonds with newly created money.

“Consumers might have been reassured by reports that the housing market may be starting to recover, and manufacturing output is no longer falling as rapidly as it was a few months ago,” Martin Gahbauer, Nationwide’s chief economist, said in the statement. “Consumers appear to be remaining cautious but not panicked by the economic climate.”

Shop-price inflation is slowing, helping purchasing power, the British Retail Consortium signaled in a separate report today. The annual rate of price gains in stores was 0.5 percent in June, the lowest in seven months. Annual gains in food prices slowed to 3.8 percent, and prices for non-food items fell 1.3 percent on the year, the BRC said.

Homeowner Optimism

About a fifth of Britons expect the economy to worsen in the next six months, compared with about half at the start of the year, Nationwide said. Homeowners expect the value of their properties to rise 0.5 percent in the next six months, the most since December 2007, the report showed.

Nationwide said last week that house prices rose in July for a third month. A manufacturing gauge based on a survey of factories climbed to 50.8, the highest since March 2008, from a revised 47.4 in June, the Chartered Institute of Purchasing and Supply and Markit said on Aug. 3.

Factory production probably fell for a second month in June, posting a 0.1 percent decline, according to the median of 25 economists in a Bloomberg News survey. The Office for National Statistics will publish that data at 9:30 a.m. today in London.

The U.K. economy contracted 0.8 percent in the second quarter after it shrank 2.4 percent in the previous three months. Consumers are less optimistic about making large purchases, Nationwide said.

Labor Market

A measure of hiring for permanent jobs fell in July for the first time since February, KPMG and the Recruitment and Employment Federation said in a separate report today. The gauge of permanent staff appointments by job consultants slipped to 46.1 from 48.6.

“We are cognizant of rising unemployment and constraints on consumer spending generally,” Ralph Topping, chief executive officer of William Hill Plc, told reporters yesterday. The U.K.’s second-biggest bookmaker forecast that full-year betting- shop profit would be lower than analysts predicted.

The Bank of England will decide tomorrow whether to extend its 125 billion pound ($211 billion) asset-purchase program. Economists are split on the outcome, with 21 out of 44 in a Bloomberg News survey predicting no expansion of the plan and the remainder forecasting that the bank will seek to spend at least another 25 billion pounds.

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