Many expect a house price fall of 1.7%

17% of people think the current economic situation is good - less than half of the level that thought the economy was in good shape before the credit crunch and Northern Rock issues arose (36%) new research has said.

Nationwide’s Consumer Confidence Index also found that consumers have become more gloomy on the house market, with many expecting house prices to decrease by -1.7% over the coming six months.

Fionnuala Earley, Nationwide’s chief economist, said: “The cut in interest rates in April did little to lift consumer spirits. Food and fuel prices remain high and, with house prices no longer rising, it is unlikely that consumer confidence will pick up very quickly. We may have to accept that confidence levels could well worsen before they get better. This is especially true as inflationary pressures mean the MPC will probably prefer to cut rates at a more gradual pace than many would prefer.

compared to 26% who thought this at the same time last year. Weaker confidence in the economic future also seems to coincide with developments in the financial markets and suggests that consumers think that the credit crunch will have some lasting economic impact. While there is still a reluctance to believe that a weaker economy will affect household incomes, consumers are less upbeat about the labour market.

With weaker economic sentiment, falling house prices and ongoing rises in fuel and food prices, it’s not surprising that consumers are less confident about spending, particularly on major purchases. 60% of consumers believe now is a bad time to make a major purchase such as a house or car compared with around half (51%) six months ago. Consumers are also more reluctant to purchase household goods – 12% believe now is a bad time to buy – twice as many as six months ago.”