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UK Nov Consumer Confidence Slumps 12 Points -Nationwide

LONDON (Dow Jones)--U.K. consumer confidence slumped in November by the steepest amount over the space of a month in the history of the survey, data from U.K. lender Nationwide showed Wednesday.

The Nationwide survey shows that consumer confidence fell to 86 in November from 98 in October, that was also the lowest level since February this year when it stood at 85.

"We've been expecting consumers to react to the events of recent months for some time so the fall in the index this month wasn't a surprise," said Fionnuala Earley, Nationwide's chief economist. "Uncertainty about the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation."

All three sub-sectors of the survey declined, with the spending index declining to 63 in November from 77 in October, suggesting that Christmas spending may be on the weak side this year.

"It's natural to think that consumers would think about tightening their belts this Christmas and this is reflected in the weaker spending index," Earley said.

In a separate index also released Wednesday, take-home pay growth slowed to just 3.2% in November from 3.4% in October, according to the VocaLink take-home pay index.

"The VocaLink take-home pay index has shown that salary growth has been modest throughout 2007, averaging just 3.5%," said Richard Cooper, head of brand and communications at VocaLink. "So far consumer spending has remained strong. However with signs of a weaker housing market, falling consumer confidence and the decline in take-home pay growth, it will be very interesting to see if the trends that indicate a low spend Christmas for consumers are substantiated."

The decline was led by a drop in service sector pay, which slowed to 3.3% in November from 3.7% a month earlier, VocaLink said.

The surveys are in line with other indicators reporting a slowdown in confidence and also the outlook for Christmas spending levels.

According to the Confederation of British Industry, retailers' expectations for consumer shopping in December declined to a balance of +11, according to the November distributive trades survey. That compares with a balance of +13 who reported an increase in actual sales volumes during November.

The data add to evidence that consumer spending is expected to slow in the coming months and will probably weigh on economic growth, which is forecast to lead to the Bank of England cutting interest rates by February 2008.

The Monetary Policy Committee begins its two-day December meeting later Wednesday.

The bank is widely expected to keep rates on hold when it makes its announcement midday Thursday although some economists believe the BOE could cut rates to 5.50%.

Company web site: http://www.nationwide.co.uk

-By Ilona Billington, Dow Jones Newswires; +44 20 7842 9452; Ilona.Billington@dowjones.com

(END) Dow Jones Newswires

December 04, 2007 19:01 ET (00:01 GMT)


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