Toucan

UK consumers are feeling at their most downbeat since May 2004, a survey claimed on Wednesday.

Nationwide says its monthly consumer confidence index is down seven points since March and a fifth lower than the corresponding period in 2007.

The building society pins the blame for the drop squarely at the feet of the global credit crunch, which has seen confidence about the UK economic situation plummet nine points.

Only one in five respondents rated the economic situation as good, a figure which has halved since before the unravelling of Northern Rock and the beginning of the credit crisis.

Nationwide says 45 per cent of people expect the economy to worsen over the next half-year.

Last month the Bank of England's monetary policy committee (MPC) voted to cut interest rates by a quarter point to five per cent and there is a 75 per cent chance of an identical cut on Thursday, Nationwide claims.

But its chief economist Fionnuala Earley said April's decision "did little to lift consumer spirits".

"Food and fuel prices remain high and, with house prices no longer rising, it is unlikely that consumer confidence will pick up very quickly," she said.

"We may have to accept that confidence levels could well worsen before they get better. This is especially true as inflationary pressures mean the MPC will probably prefer to cut rates at a more gradual pace than many would prefer."

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