Savers look set for more suffering this year after it was announced that consumer confidence has slipped again.
The July Consumer Confidence index fell for a fifth month in July to its lowest reading since August 2009, when the British economy was still shrinking.
Britain is facing an unsavory combination of high inflation, high unemployment and potentially low growth for the remainder of 2010 and for much of 2011. Although the economy grew by 1.1pc in the second quarter, economists are not ruling out a return to recession as economic indicators for the second half have weakened.
The outlook looks set to worsen in January when VAT will rise to 20 per cent and Bank of England Governor Mervyn King confirmed fears when he said recently that interest rates are likely o remain low for the next few years. He said the economic recovery ‘may not be sustainable’.
The report was the first opportunity that consumers had to respond to the austerity measures announced in the Government's Emergency Budget in June, which will bear down on households over the coming months and years.
Nick Moon, managing director of GfK NOP social research said: "Given that consumer confidence measures are normally good predictors of what the economy itself will do a few months later, the continuing slide in the index makes a double-dip recession look more of a possibility as each month goes by.”
This, along with the higher taxes and drastically reduced public sector spending planned by the Government, are likely to continue to impact consumer sentiment, despite the country's emergence from recession in the fourth quarter of 2009.
He added: "It's possible that respondents are already factoring into their view of the economy over the next 12 months the likely recessionary impact of the government's announcement about the level of spending cuts it wishes to make, but if they are not then the prognosis is even more gloomy."
The decline in confidence also supports the widely-held view that a consumer-led recovery is unlikely and savers will lose out further with banks failing to provide accounts that offset the negative effects of low rates and inflation.
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