Money News
Latest data from the Nationwide Building Society shows consumer confidence climbing in May - the Nationwide Consumer Confidence Index rising nine points to 99 - its highest point since November 2005.
Consumers were upbeat about the economy last month and felt comfortable that things would continue to be good over the coming months. However, these sentiments don't seem to make them feel like spending. The Spending Index fell five points - the only one of the four confidence indices to fall.
Confidence moved most sharply in the week when interest rates increased and Tony Blair announced his departure date from Downing Street: spending sentiment fell sharply while overall confidence rose.
Consumers are upbeat about the current economic and employment situation, with the Present Situation Index rising 12 points to 101 - the largest recorded rise. The last time people felt this happy about the current state of the economy was in November 2005 when the pace of economic growth was starting to pick up. People's views on the current employment situation were a big driver behind the growth in confidence, with 60% believing that there are many jobs available now.
Looking forward, consumers are optimistic about the future - their feelings about the economic and employment situation in six months time returning to levels seen before the base rate began to creep up. Confidence about job availability in the future helped push the Expectations Index up six points to 97 - its fifth consecutive rise.
However, there was a three point fall in the number of people who think that now is a good time to buy major items such as a house or car. That's likely to be a reflection of the impact of rising interest rates on family finances, says the Society. Indeed, housing market and consumer borrowing also suggests that interest rates are beginning to bite.
All of that said, views about the housing market remain upbeat. People's expectations of future house price growth reached a new high in May: they now expect house prices to rise 4.5% over the coming six months. These views are likely to moderate over coming months as consumers see evidence of earlier interest rate rises taking hold, however.
06 June 2007 © Moneyextra.com
Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.