Consumer confidence slumps

Consumer confidence fell sharply during April, dealing a blow to recovery hopes for the UK economy, figures showed today.

Market research group GfK NOP said all five of the measures of consumer confidence it tracks dropped during the month, with people feeling most pessimistic about the state of their own finances.

The group said its overall index fell deeper into negative territory, sliding by three points to minus 31, well down on the minus 16 it stood at in April last year.

It added that it was only the third time the index had dropped below minus 30 in the survey's 37-year history, with the previous two occasions being in early 1990 and mid-2008.

Nick Moon, managing director of GfK NOP Social Research, said: "Coming after six months of stagnant economic growth, this is a significant drop - one that is bad news for the Government and bad news for the economy.

"It suggests that the attempts to spur growth in last month's Budget have failed to convince the public, and this may well be sorely felt on the already beleaguered high street.

"It is particularly striking that all five areas of the index fell this month, pointing towards growing gloom as we head into summer.

"These figures must make the possibility of a double dip recession increasingly real."

The research comes the day after official figures showed gross domestic product (GDP) grew by just 0.5% between January and March, following a shock decline of 0.5% in the final quarter of 2010.

The Office for National Statistics warned that underlying growth was broadly flat and the economy has made no progress since the third quarter of 2010.

The GfK NOP research showed that the biggest fall was to people's confidence about their own personal financial situation, both during the past year and in the next 12 months, with both of these measures dropping by four points to minus 23 and minus 14 respectively.

Both indexes are now at their lowest level since the middle of 2008, with people's optimism about their own financial situation going forward 16 points lower than in April last year.

There was a three point slide in people's confidence about the general economic situation during the past year, to minus 57, while the index measuring people's expectations for the economy in the coming year dipped by one point to minus 30, 29 points lower than 12 months ago.

Unsurprisingly, given the low level of confidence in the economy and their own financial situation, there was a further drop in people's optimism about whether it is a good time to make a major purchase, with this index falling by two points to minus 31.

Allan Monks, of JP Morgan, said: "The deterioration in confidence is more than likely related to the ongoing phase of fiscal tightening, which intensified this year with the January VAT hike.

"Little in the data related to the household sector suggests that spending growth is anything other than weak - the key question is how weak.

Our analysis on the consumer suggests that consumer spending in the first half of the year is flat to falling."