Consumer confidence rises as borrowing falls by record sum

Tuesday, 31 January 2012 11:54

New statistics have shown a surprise boost to consumer confidence in January 2012 as well as a decrease in personal debt levels.

The GfK NOP Consumer Confidence Index found that sentiment among consumers had risen by four points to minus 29 between December and January, the highest figure seen since last June.

It was unexpected by many analysts due to the contraction of GDP in the final quarter of 2011, but the increase was put down to a slight fall in inflation and the decision by energy companies to cut their gas and electricity prices.

GfK NOP social research spokesperson Nick Moon insisted that the figures need to be treated "with caution".

Meanwhile, the Bank of England's latest release found that total non-mortgage lending to individuals fell by £377 million in December, the highest amount on record.

This was attributed to people being reluctant to take on new debts such as overdrafts while the economy is unstable and unemployment continues to rise.

IHS Global Insight's Howard Archer said the consumer confidence data is "modestly encouraging" and could mean spending will not decline by as much as originally feared in 2012.

However, he predicted that the UK will still go into a "short, shallow recession" before recovering slightly in the second half of the year.

Commenting on debt, Mr Archer said: "We expect consumer borrowing to remain limited over the coming months, although there is the possibility that there could be an increase in 'stressed borrowing', with more people having to borrow to help finance their spending."

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