The Nationwide Building Society reported Wednesday that its consumer confidence index rose to 63 from an upwardly revised 61 in July, and also came in higher than economists’ expectations for a reading of 62.
The August reading is the highest since May 2008, when the index stood at 66. The latest survey was carried out in partnership with the market research group TNS from July 20 to August 23 among 1,000 people.
“The moderate increase in confidence this month indicates that, for the first time since April, consumers are beginning to feel more positive not only about the future, but also about the present situation,” Martin Gahbauer, chief economist with Nationwide said.
The present situation index rose one point to 17 in August, after reaching an all-time low in July. The gauge rose for the first time since April. The expectations index increased by three points to 94 and the spending index climbed one point to 97. However, consumers continued to remain cautious about making major purchases.
“The rise in positive sentiment across all the indices is no surprise as a number of key economic indicators continue to show that we may have reached the bottom of the current recessionary cycle”, Nationwide said.
Shop prices dropped 0.1% year-on-year in August, marking their first decline since February 2007, the British Retail Consortium said on Wednesday.
On Tuesday, an official report showed that manufacturing output rose for the second consecutive month in July and at the fastest pace since January 2008, boosted by a rise in auto production. Output grew 0.9% in July, after a 0.6% rise in June.
Moreover, a report by Manpower released Tuesday showed that hiring intentions for the fourth quarter rose for the first time in three years.
Further, a report released today by Markit Economics, on behalf of the Recruitment & Employment Confederation and KPMG, showed that the job market in the UK showed signs of improvement in August, reflecting a rise in both temporary and permanent staff.
Even with all the positive news, Nationwide noted that there was likely to be a slow recovery. The report said, “It is likely that there will be a protracted recovery and we may see some volatility in the data as factors such as the rise in fuel duty affect sentiment.”
A similar view was echoed by Bernard Brown, Partner and Head of Business Services at KPMG who said it was too early to speculate whether the improvement in the job market signaled the end of the recession.
Elsewhere, the National Institute of Economic and Social Research in its latest report pointed out that even though GDP grew 0.2% in the three months ended August,there could now be a period of stagnation, with output rising in a few months and declining in others. Further, it warned that the end of recession did not mean a return to normal economic conditions.
On August 9, the British Chamber of Commerce said the UK economy could contract faster than earlier expected. The BCC said the economy is likely to contract 4.3% this year, worse than a 3.8% drop estimated in June.
However, it expects the economy to grow at a faster than initially expected pace in 2010. The UK economy is projected to grow 1.1% next year, better than a 0.6% growth anticipated earlier. In 2011, growth is expected to rise to 1.9%.
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