European
UK Consumer Confidence fell in December; Marks & Spencer reports first same-store sales fall in 2 1/2 years on reduced Christmas spending
By Finfacts Team
Jan 9, 2008, 08:41

Marks & Spencer's Chairman Lord Burns and Chief Executive Sir Stuart Rose

The UK Nationwide Consumer Confidence Index dropped one point to 85 in December – the lowest level since February 2007. In spite of the quarter point cut in rates in December, ongoing economic uncertainty and the impact of higher food and petrol prices seem to be continuing to affect consumers’ confidence. In another report today, Marks & Spencer said that sales had fallen in December.

Consumers’ feelings about the current economic and employment situation, reflected in the Present Situation Index, deteriorated in December. The index fell three points from 91 to 88 due to more negative views about the economy. The Expectations Index (how consumers feel about the economic and employment situation and income in six month’s time) remained stable (83), but the underlying data shows a significant weakening in confidence in the economy and future income expectations.

However, consumers still seem to feel optimistic about their jobs, both at the moment and in six months time and it is this which is supporting expectations in particular. The Spending Index (consumers’ willingness to spend) picked up by a respectable five points in December, but at 68 remains well below the average for the year of 82.

The UK Nationwide Consumer Confidence Index uses a similar methodology to that of the US Conference Board, the most highly regarded Consumer Confidence Index in the US, widely acknowledged as a key US economic indicator. Nationwide’s monthly survey is compiled in partnership with TNS.

Fionnuala Earley, Nationwide’s chief economist, said: “Another weak month for Consumer Confidence is not surprising given current economic conditions. Continued uncertainty about the future path of the economy along with a weakening housing market was bound to affect consumer sentiment. Early signs of strong consumer presence at the seasonal sales is encouraging, but the need to persuade shoppers through heavy discounting could itself be seen as a signal of underlying caution. Further rate cuts expected in the first quarter of 2008 may help to improve matters, but it is likely to be a few months before consumer confidence recovers to levels seen earlier this year.”

UK house prices fell in the final three months of 2007, the first quarterly drop for seven years, HBOS Plc said yesterday.

Also on Tuesday, the British Retail Consortium reported that UK retail sales rose only 0.3% in December on a like-for-like basis, compared with December 2006, when sales were up 2.5%.

Today, Marks & Spencer Group, the UK's biggest clothing retailer, reported its first same-store sales fall in 2 1/2 years after shoppers reined in Christmas spending.

Sales fell 2.2% at stores open at least a year in the fiscal third quarter ended Dec. 29th.