Consumer confidence falls amid tax rise fears

Consumer confidence plummeted during December because of concerns over tax rises, research showed today.

Nationwide's consumer confidence index dropped by five points to 69 during the month, the biggest slide since November 2008.

The fall was driven by people becoming more pessimistic about the future economic situation, with only 34 per cent expecting it to be better in six months, down from 41 per cent in November.

The building society said the increase in VAT back to 17.5 per cent, as well as tax changes announced in the pre-Budget report, were also likely to have had an impact on confidence and made consumers reassess their expectations.

Overall, the expectations index fell by eight points during the month, although at 101 it remained well up on the record low of 58 to which it fell in January last year.

Martin Gahbauer, Nationwide's chief economist, said: "The five-point fall in confidence in December suggests that an element of caution may have begun to creep back into the minds of consumers over the Christmas period.

"Although it is still early days, these lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn."

The proportion of consumers who think the economic situation is bad rose slightly to 73 per cent, while those concerned about a lack of available jobs increased by three per cent to 70 per cent.

Consumers showed a mixed attitude towards spending, with the number who thought it was a bad time to make a major purchase, such as a house or car, rising by four per cent to 38 per cent. However, the proportion of people who thought it was a good time to buy household goods rose from 39 per cent to 42 per cent.

Expectations about house prices remained unchanged, with people predicting the value of their home would rise by one per cent in the coming six months.

Market research group TNS-RI questioned 1,014 people between 23 November and 20 December.