Consumer spending falls sharply amid worries about spending cuts

Consumer confidence fell to its lowest level for more than a year in September as people worried about government spending cuts, according to research from Nationwide Building Society. The spending index saw the sharpest fall, dropping to its lowest level since November 2008, with just one in four people stating they thought it was a good time to make a big purchase such as a house or car, while only 35% thought it was a good time to buy household goods. There was a steep fall in the present situation index, with nearly two-thirds of people saying the economic situation is bad. The expectations index also nosedived, with 31% of people believing the economy will deteriorate in the next six months, while 58% said they think there will still not be many jobs available. The group's main consumer confidence index dropped by nine points to 53, the lowest level since March 2009, reversing the gain seen in August . Martin Gahbauer, Nationwide's chief economist, said: "September saw confidence return to its downward path following what now appears to have been a temporary uplift in sentiment during August. It would seem that the pessimistic sentiments of a few months ago have been renewed and this has perhaps been driven by a realisation of the true impact of the cuts announced in the emergency budget. "The government's impending spending review is likely to have a strong influence on consumer confidence in the coming weeks and we can expect the index to remain volatile until the full impact of this has been assessed." He added that the fall in the spending index could be a cause of concern for retailers in the run-up to Christmas, as consumers may be beginning to feel the pinch in their spending power. Expectations for house prices increased marginally during the month, with consumers expecting the cost of property to rise by 0.1% during the coming six months, compared with predicting a drop of 0.1% in August.