Brexit Bite Pushes U.K. Consumer Confidence to Six-Year Low

(Bloomberg) -- U.K. house-price growth remained stuck in a subdued pattern in August as worries about the economy knocked consumer confidence lower.

Nationwide Building Society said values were unchanged on the month and rose 0.6% from a year earlier. That's a ninth straight month of sub-1% increases. The release came as GfK said consumer sentiment fell to match its lowest level in six years.

With a no-deal Brexit looming, households are becoming more concerned about their finances and the broader economy. Their outlook for the latter is now near its worst since 2011. They may also be fretting about the impact of the weaker pound on inflation and their shopping bills. A Citigroup report on Friday said inflation expectations jumped to a six-year high of 3.2% from 2.8% in July.

Nationwide said that low borrowing costs and a strong labor market will provide some support for housing demand, but also noted the uncertainty effect from Brexit. Lending data suggest there's still relatively solid demand for property. Bank industry figures show loans for house purchases rose almost 11% in July from a year earlier.

What Bloomberg's Economists Say...

“The U.K. Nationwide house price index crept up in August in year-on-year terms, though this was more to do with favorable base effects rather than underlying demand. House prices will continue to be curtailed by the growing threat of a no-deal Brexit going forward.”

--Niraj Shah
Read the full REACT

Also on Friday, Lloyds bank said that business optimism crashed in August to the lowest since 2011.

All five components of the GfK measures fell this month, led by people's view of their future personal finances, and the future of the British economy in general. The index for willingness to make major purchases also fell.

“If there is a continuation of that dip in our feelings about our future wallets, we'd quickly see a headline score crash to a level that approaches the worrying figures seen in the worst days of the 2008/2009 financial crisis,” said Joe Staton, client strategy director at GfK.

Read More: No-Deal Brexit Spells More Pain for Already-Weakened Economy

The scores could indicate more pain for an already hurting British economy The U.K. posted its first quarterly contraction since 2012 in the second quarter, and on Wednesday Prime Minister Boris Johnson's decision to suspend parliament next month battered the pound as no-deal Brexit anxiety heightened.

To contact the reporter on this story: Eddie Spence in London at espence11@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, David Goodman

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