Interest rate rise hits consumer confidence
Monday, 18 Dec 2006 08:21
Consumer confidence was hit by November's interest rate rise
Consumer confidence received another blow in November, according to high street bank Lloyds TSB.
The bank's latest consumer barometer shows that concerns about the inevitability of future interest rate rises and insecurity about jobs are undermining prospects for an economically healthy 2007.
Underpinning these concerns is a growing anxiety about inflationary pressures; 62 per cent of consumers believe that prices have risen in the last year, compared to 60 per cent in October.
"Rate rises in recent months have obviously dampened consumer optimism and despite the bank rate holding at five per cent this month, consumers are expecting the gloom to continue well into 2007," Trevor Williams, chief economist at Lloyds TSB Corporate Markets, commented.
"However, this widely held belief that rates are on an upward spiral is at odds with the views of the majority of economists who believe that rates may not rise any further and, perversely, does not seem to have quashed the insatiable drive that continues to buoy the housing market."
Today's gloomy prognosis reflects that of building society Nationwide's own consumer confidence index for November, which fell dramatically by nine points after its autumnal rally.