Consumer confidence levels have fallen to a record low, according to Nationwide, which found that confidence levels fell to 69 per cent in May, the lowest levels since the index began in May 2004 and 30 per cent lower than in May last year.
The main cause of this decline in confidence was economic turmoil, with uncertainty in the mortgage
market contributing to financial fears. The report showed that 52 per cent of all people now think that the current economic situation is 'bad', compared with 39 per cent last month and 35 per cent in May 2007.
And, while more people are satisfied with employment levels – 51 per cent compared with 47 per cent in April – almost two thirds (65 per cent) believe now is not a good time to buy significant items such as a house or car.
Nationwide's chief economist, Fionnuala Earley, said: "Consumer sentiment remained gloomy in May as consumers revised their views about the current economic situation. Darker economic news throughout the month as fuel prices reached new highs, food prices remained elevated and uncertainty about an early cut in interest rates heightened, are likely to be major factors behind this.
"Confidence in spending also took a big knock, but continued faith in the jobs market suggests that this is being driven by the squeeze on people's incomes from higher prices and weakness in the housing market, rather than fears over job security."
The credit crunch has forced many consumers to tighten their belts, leading to a five-point drop in the spending index to 60 per cent. House prices fell by a significant margin in May, and many homeowners expect prices to fall 3.5 per cent over the next six months.