Consumers still cautious but optimism grows

Consumer confidence rose last month but households were still cautious in new year spending, a survey showed today.

The Nationwide Building Society's consumer confidence index rose three points to 73 in January, almost twice the low of 39 recorded in the month last year when Britain was mired in its deepest recession for 70 years.

The index for confidence in the current economic and employment climate also showed growing optimism by rising to 23 from 20 in December. Confidence about the economy, employment and household income over the next six months also increased in January, with the expectations index at 107, up from 103 in December.

"Consumers remain cautious about the speed at which the UK will recover from what has been a longer and deeper recession than many expected," said Martin Gahbauer, Nationwide chief economist.

"Positive signs from the manufacturing sector and labour market may have helped boost confidence during January, but confidence is likely to remain fragile for some months to come."

Britain's economy grew just 0.1 per cent in the last three months last year, ending an 18-month recession but disappointing analysts who had expected a stronger bounce back to growth.