VAT hike dents consumer confidence

Date: 6th January 2010

Consumer confidence was at its lowest rate for longer than 12 months during December 2009, according to a new report.

Nationwide's consumer confidence index decreased by five points to 69 last month.

The figure represented the biggest drop since November 2008.

Nationwide said the increase in VAT, which came into effect on January 1st, as well as other tax changes announced in November's Pre-Budget Report, were likely to have made people them reassess their expectations for the future of the economy.

The report revealed that just 34 per cent of people expect the economic situation to improve over the next six months, down from 41 per cent in November 2009.

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early days, these lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn."