Confidence among British consumers fell more than expected in December, with the GfK NOP index moving further into recessionary territory. The headline index dropped to -33 from -31 previously (consensus:-32; Barclays Capital: -31), reaching its lowest point since February 2009.

Three of the survey's five sub-indices fell, while two were unchanged. The sub-index for the general economic situation over the past 12 months fell by one point to -62, and the sub-index for the general economic situation over the next 12 months dropped by eight points to -41. The climate for major purchases also appeared to have deteriorated, with the respective sub-index falling four points to -31.
 
The fall in the consumer confidence index seems to have been driven by consumers' deteriorating view on the economic outlook. This is unsurprising against the backdrop of recent economic data and worries about the euro area crisis. Furthermore, the survey was carried out between 2-11 December, soon after the Chancellor's Autumn Statement, in which official forecasts of UK growth for 2012 were revised down significantly. We expect consumer confidence to remain at these low levels in the face on job uncertainty, high inflation and subdued earnings growth. Furthermore, we expect the subdued consumer sentiment and high inflation to remain a drag on household consumption.


source: BarCap