U.K. Consumer Confidence Falls to Lowest in Almost a Year on Budget Cuts

U.K. consumer confidence fell more than economists forecast this month as the prospect of government spending cuts undermined Britons’ optimism on the economic recovery, GfK NOP said.
An index of sentiment declined to minus 22 from minus 19 in June, the lowest in 11 months, the market researcher said in an e-mailed statement today in London. Economists had forecast a decline to minus 20.
Chancellor of the Exchequer George Osborne is cutting welfare spending and increasing sales tax to reduce the record budget deficit, threatening growth. Bank of England Governor Mervyn King said July 28 there may be a “considerable” way to go before economic conditions stabilize enough to allow interest rates to rise to a “normal” level.
“The continuing slide in the index makes a double-dip recession look more of a possibility,” Nick Moon, managing director at GfK, said in the statement. “It’s possible that respondents are already factoring in” the “likely recessionary impact of the government’s announcement about spending cuts.”
A measure of Britons’ assessment of their personal financial situation over the next 12 months dropped 4 points to minus 6 in July. A gauge of their outlook for the economy plunged 13 points to minus 25.
U.K. government bonds rose, pushing the yield on the 10- year gilt down 3 basis points to 3.37 percent as of 9:12 a.m. in London. The pound gained 0.1 percent against the dollar to $1.5630.
‘One Number’
The British Retail Consortium said in a separate report today that employment at retailers rose 3 percent in June from a year earlier. For the second quarter, retail payrolls jumped 3.6 percent on the year, equivalent to a net 22,055 jobs. The quarterly increase was driven by new store openings, the BRC said in the report.
The U.K. economy grew 1.1 percent in the second quarter, the most in four years. King yesterday cautioned lawmakers in Parliament “not to read too much into one number” as policy makers debate when to raise the benchmark interest rate from a record low of 0.5 percent.
“There will come a point when we will certainly need to ease off the accelerator and return Bank Rate to more normal levels,” King said. “I look forward to that time because it will probably be a signal that there is a smoother drive ahead, with the economic outlook improving in a durable way. But I fear there is some considerable distance to travel.”
GfK said its gauge of shoppers’ attitude toward making a major purchase rose 8 points to minus 16. The increase may reflect a view among consumers that any big-ticket items should be bought before the sales-tax rate rises to 20 percent in January from 17.5 percent, Moon said.
GfK surveyed 2,000 people between July 2 and July 11 and estimates a margin of error of 2 percentage points.