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UK consumer confidence shows surprise rise in Dec

Published 12/18/2008, 07:01 PM
Updated 12/18/2008, 07:05 PM

LONDON, Dec 19 (Reuters) - British consumer confidence rose unexpectedly for a second month running in December as a cut in sales tax and lower interest rates made shoppers more inclined to spend, a survey from pollsters GfK NOP showed on Friday.

The survey's consumer confidence index rose two points to -33, lifting the index to its highest level since September. Analysts had forecast the index would drop to -39 matching the series low hit in July.

Driving the recovery was a rise in the "climate for major purchases" sub-index, which jumped 10 points to -29. Still, this was well below the -14 registered at the same point last year.

The sub-index measuring how people thought the economy would perform over the next year fell by five points to -41.

"Consumers have become even less confident about the future economic situation but, among these historically low levels of confidence, there is perhaps a glimmer of hope," said Rachael Joy, one of the compilers of the survey.

"For the third month running, there has been an improvement in the number of consumers who think now is a good time to make a major purchase, suggesting that high street deals and the small reduction in VAT have improved consumers views on this area."

The government cut value-added sales tax from 17.5 percent to 15 percent at the start of December as part of a package of measures to help families and businesses weather the economic downturn.

Britain's economy shrank by 0.5 percent in the third quarter and a run of dismal economic indicators suggests it may have contracted by as much as 1 percent in the fourth quarter.

The Bank of England has cut interest rates by three percentage points since October, bringing them down to 2 percent, their lowest level since 1951. Further cuts are expected in the new year, with some economists forecasting they could fall to below one percent.

(Reporting by Christina Fincher)

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