The revival in confidence among British consumers has ground to a halt because of fears over job security, the European Commission's GfK survey said.
Overall UK consumer confidence was static in June, with the headline figure unchanged at +5, ending a long run of monthly improvements.
The survey found that 31 per cent of consumers intended to reduce spending on major purchases over the next year, with only 27 per cent planning to spend more, denting hopes of a retail-driven recovery. The reason for this was "widespread and persistent fear of unemployment", said the survey.
Despite a gradual erosion of fears about joblessness, 42 per cent still believed unemployment would increase over the next year. "Spending intentions are likely to increase as the fear of unemployment recedes," said GfK. "However, at the current rate of improvement this promises to be a slow process."
The fear of rising unemployment is counter to official figures, which have recorded drops in the number of benefit claimants for five consecutive months.
The GfK report supports the picture painted by surveys of sluggish high-street growth with consumers unwilling to accept any price rises. But GfK said the number expecting the overall economic situation to improve in the next year outweighed those expecting a deterioration for the first time since June last year.
Overall optimism was supported by an indicator showing that the economic outlook is at its most positive level for more than five years. Research firm NTC said its leading indicator of economic activity rose for the eighth month running from 102.8 in April to 104.0 in May - its highest level since September 1993.
Meanwhile, Ian Plenderleith, a member of the Bank of England's Monetary Policy Committee, said the recent rise in house prices did not presage an unsustainable consumer boom.
He said the growth reflected an increase in home ownership rather than buyers seeing property as an investment opportunity. "This is a thoroughly healthy thing," he told a Council of Mortgage Lenders forum.Reuse content