U.K. Consumer Confidence Index Increases to 1 1/2-Year High

By Svenja O’Donnell

Oct. 7 (Bloomberg) -- U.K. consumer confidence rose to the highest in 1 1/2 years in September as the economy showed signs of escaping the recession, Nationwide Building Society said.

An index of sentiment rose six points to 71, the highest since April 2008, Britain’s biggest customer-owned lender said in an e-mailed statement today. TNS questioned 1,000 people for Nationwide from Aug. 24 to Sept. 20.

The Bank of England will tomorrow keep its asset-buying program capped at 175 billion pounds ($280 billion) as policy makers assess the strength of the recovery, economists say. Reports this week showed house prices have recovered to the level of a year ago and that the economy is no longer shrinking.

News that the recession has abated “may have helped to improve sentiment in September, which may have also been boosted by continued positive news about the housing market and the strong rally seen in the equity markets in recent months,” Mark Saddleton, Nationwide’s head of economic and market analysis, said in the statement.

An index measuring expectations for the economy rose 9 points to 106, the highest since December 2005, Nationwide said. The gauge of spending increased by 3 points to 103.

Britain’s economy stagnated in the third quarter after shrinking 0.6 percent in the three months through June, the National Institute of Economic and Social Research said yesterday.

The labor market, where unemployment rose to a 14-year high last month, may be improving, according to a separate report today by KPMG and the Recruitment and Employment Federation. Their measure of hiring for permanent jobs rose to an 18-month high of 51.3 in September, from 50.6 the previous month.

Printing Money

The Bank of England is buying bonds with newly printed money to ward off the threat of deflation after the financial crisis plunged the U.K. economy into its sharpest recession since World War II.

Average U.K. shop prices fell 0.1 percent in September from a year earlier, declining for a second consecutive month, the British Retail Consortium said in a report today.

The central bank will probably keep the size of its asset- purchase plan unchanged at its decision tomorrow, according to all 42 economists in a Bloomberg News survey. The benchmark interest rate is at a record low of 0.5 percent.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.