A recent survey showed that consumer confidence has touched new low in February as Britons became wary of an early economic recovery and job outlook also remained grim.
The Nationwide Consumer Confidence Index dropped by 10 points to its lowest since record keeping began in 2004.
As people became more pessimistic, the number of people who believe economic conditions will deteriorate in the next six months grew by 6% to 42% in February. The number of people who believed there would be fewer jobs in the next six months jumped by 5% to 63%.
The measurement of people’s appetite for buying goods, known as the spending component, dropped to 52 points last month, the lowest since the survey began.
People feared that rising inflation will force the Bank of England to raise rates in the second quarter of 2011, squeezing their budgets further.
The situation was aggravated by the contraction of the economy in the last quarter of 2010 and people came round to believe that the economy is unlikely to make a quick turnaround.
“There are many factors that may be holding back confidence at the moment. The labour market remains fragile, with the unemployment rate still high and wage growth weak”, said Robert Gardner, chief economist of Nationwide.
“Inflation is showing few signs of easing, and high fuel prices and the VAT increase have further eroded disposable incomes in recent months”, he said.
“Furthermore, news that the economy shrank in the final quarter of 2010 will have done nothing to lift already dampened spirits”, he added.