Little spring cheer for consumer confidence

People became less confident about the present situation in March. Two thirds (66%) think that there are currently few jobs available. This is likely to be due to the deterioration in the labour market, as unemployment has risen and vacancies have fallen.

The Expectations Index recorded a two point fall from 58 in February to 56 in March. The main reason for this was sentiment towards household income in six months' time. Perhaps consumers have recognised that their household incomes are likely to be affected by the recession. Following a steep increase in February, the Spending Index remained static at 94 during the month. This most likely reflects continued discounting on the high street, rather than the desire to buy, especially given the slowdown in retail sales reported in February.

Fionnuala Earley, Nationwide's chief economist, said: "Overall consumer confidence has remained broadly stable since the start of the year, but feelings about the current labour market have weakened. Further reports of job losses are likely to have affected consumers' views of this. However, increased optimism towards the current and future economy is encouraging. Even though retail sales are now weaker, spending sentiment has remained stable. This stability isn't surprising given further reductions on the high street and lower mortgage costs for some."

Consumers remain despondent about the labour market...

Consumers first started to signal decreasing sentiment around the current job situation a bit earlier than the actual increases in unemployment were recorded. The number of people that believe there are few jobs available in six months' time began to pick up in November 2007, whereas there was no recorded increase in unemployment until the following year. Consumers' opinions on the current employment situation seem consistent with the expectation that unemployment will continue to increase in the short term.

...but more confident about economic conditions

People felt slightly more optimistic about the current economic situation this month, with 83% believing the current climate to be bad, compared to 86% in February. Confidence may have been buoyed by a further reduction in the Bank of England Base Rate at the start of the month. In addition, since the start of the year, a greater proportion of consumers (58%) believe that conditions will not be any worse in six months' time. This may suggest that consumers are looking for light at the end of the tunnel.

Consumers pessimistic about future income

Consumers now seem to have a more modest view of future household income. When comparing the previous three quarters, we can see a larger percentage of people think their income will be lower rather than higher in the next six months. This is consistent with other views about the labour market and is likely to lead to constraints on spending in the coming months.

Expectations about house price falls over the next six months moderated further in March. Consumers now expect prices to fall by 3% over the next six months, compared with 4.7% in February.