for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

Consumer morale nears 2-year low

LONDON (Reuters) - Consumer morale fell sharply in the wake of the Northern Rock crisis, hitting its lowest level in almost two years, a survey showed on Friday.

Pedestrians walk past sale signs in an undated file photo. Consumer morale fell sharply in the wake of the Northern Rock crisis, hitting its lowest level in almost two years, a survey showed on Friday. REUTERS/Toby Melville

The drop in sentiment may prove worrisome for Prime Minister Gordon Brown as he decides whether or not to call an early election.

Research group GfK NOP’s consumer confidence barometer fell to -7 in September from -4 in August, below forecasts for a reading of -6.

When only interviews made after the Northern Rock debacle were taken into account, the figure was -9, the lowest since December 2005.

“The sharp fall in confidence in September is the first clear evidence that the Northern Rock crisis has significantly affected the consumer,” said Howard Archer at Global Insight. “We suspect consumer spending will lose significant momentum over the coming months.”

Interviews for the survey were carried out in two rounds; the first August 31-September 2 and the second September 14-16, just after the country’s fifth-biggest mortgage lender revealed it had been forced to ask the Bank of England for an emergency credit line.

Broad media coverage of Northern Rock’s cash-flow crisis sparked the country’s first run a bank in more than a century.

“At the beginning of the month consumers were quite upbeat,” said Rachael Joy of the research group’s consumer confidence team.

“After the headline news about Northern Rock, consumer sentiment took a tumble and dropped to -9, giving us an overall score for the month of -7.”

Component indices showed Britons were more worried about the general economic situation than their own finances.

Against a backdrop of broad economic uncertainty, consumers were less inclined to make major purchases than at any time this year.

Short sterling interest rate futures held on to gains after the survey, leaving the market pricing in at least one rate cut over the course of the next year.

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up