Consumer confidence fell this month to its lowest level since the start of the Iraq war nearly three years ago, according to a survey that took the shine off a surge in mortgage approvals and shopper numbers.
The index produced by the analysts GfK NOP dropped by a point to -9, the lowest recorded since March 2003 and six points lower than December 2004.
Carol Bernasconi, a divisional director at GfK NOP, said: "Consumer confidence is not yet showing signs of an upturn and a year which has seen an unprecedented level of natural disasters across the world has left the nation in a subdued mood."
The fall was driven by modest declines in people's feelings for their personal finances and the general economic outlook. A drop in the climate for major purchases, which fell to +2 from +8 a year ago, also affected the fall. It stood in marked contrastto the crowds on the nation's high streets.
Malcolm Barr, the UK economist at JP Morgan, pointed out that the link between the GfK survey and retail sales data had broken down this year. "We would not treat this as a reliable signal at this stage," Mr Barr said.
Shopper numbers have so far been one-fifth above last year's levels and John Lewis, the department store chain, has reported a near-12 per cent rise in December sales. At its flagship store at Brent Cross, north London, bargain hunters started queuing at 1.30am on Wednesday.
Analysts believe that consumers' willingness to shop - or at least spend their leisure time in shopping malls - is in part supported by the robust health of the housing market.
Figures published yesterday showed homebuyers rushed to grab cheap mortgage deals in November. The number of mortgages approved but not yet made - a sign of house prices three months hence - jumped almost 51 per cent in November compared with a year earlier, the major high street banks said.
The 71,310 approvals were down slightly from October's 16-month high, although the value of the new loans jumped by 64 per cent on an annual basis. Net mortgage lending - money actually paid out - hit an 18-month high of £5.1bn, markedly up from the £4.4bn over the preceding six months.
Howard Archer, the chief UK economist at Global Insight, said: "Activity is benefiting from August's rate cut, increasing confidence in the housing market and still rising employment. This is likely to put a floor under house prices."
Mortgage lenders such as Halifax and Nationwide are predicting only modest house price growth for 2006 and analysts said yesterday's data did not herald a return to boom conditions.
The divergent picture from the confidence data, mortgage figures and anecdotal evidence from the high street will give the Bank of England's Monetary Policy Committee food for thought when it meets in a fortnight. Economists believe it will want to see whether the crowds of shoppers result in a surge in sales - and crucially whether this volume is simply being won at the expense of price cuts.Reuse content