The main confidence index fell by two points to 38 in December after a small bounce the previous month. December’s reading is the second lowest recorded in the history of the index – the lowest level recorded being 36 points (October 2011).
Robert Gardner, Nationwide's Chief Economist, said:
"Consumer confidence was at a low ebb as 2011 drew to a close, with the main index recording its second lowest reading ever in December.
"While disappointing, the results are not surprising. Right to the end, 2011 was an extremely tough year for UK consumers.
"With the economy struggling to gain any sort of momentum, labour market conditions became even more challenging in the latter half of the year, with the unemployment rate rising to its highest level for fifteen years.
"At the same time, the cost of living continued to rise at more than twice the rate of underlying wage growth, putting further pressure on household budgets and bearing down on sentiment.
"In December these concerns were likely to have been compounded by events in Europe, with news about the intensifying Eurozone crisis colouring people's view of the current economic situation and their expectations for the future.
Weaker expectations the main driver in December, but attitude to spending remains surprisingly resilient
"There was little change in consumers' assessment of their current situation, in December, with this Index remaining anchored close to all time lows.
"It was greater pessimism towards the future - especially towards the wider economy - that was the main driver behind the decline in confidence over the month.
"Attitudes to spending have been surprisingly resilient. Nearly one in three people (31%) now believe it's a good time to make household purchases.
"However, consumers are still more cautious when it comes to big ticket items such as a house or car, with half of people believing now to be a bad time to make a major purchase.
"The downbeat mood towards the future is also evident in peoples' assessment of the UK property market, where consumers currently expect house prices to decline by 1.3% over the next six months.
The year ahead...
"With the UK recovery unlikely to gain much forward momentum in 2012, we are unlikely to see confidence surge in the near-term. However, there are some positive developments on the horizon for UK consumers.
"As we move into 2012, inflation should continue to fall back, while interest rates are expected to remain at their current all time low of 0.5% throughout the year.
"This should help to ease the squeeze on household budgets and help to lift spirits in the coming months."
