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Jan. 19 (Bloomberg) -- U.K. consumer confidence fell in December to close to a record low as rising unemployment and the euro debt crisis sapped Britons’ expectations for an economic recovery.
An index of sentiment fell to 38 from 40 in November, Swindon, England-based Nationwide Building Society said today. It dropped to 36 in October, the lowest since the survey began in 2004. A gauge of consumers’ expectations fell 5 points to 50, also near a record low.
The impact of the euro-area debt turmoil and Prime Minister David Cameron’s austerity drive, which will lead to around 700,000 job cuts by 2017, are undermining confidence. Unemployment rose to the highest rate in 16 years in the three months through November, data yesterday showed.
“Recent months have seen the labor-market outlook deteriorate, while worries over the euro-area situation have mounted,” said Chris Crowe, an economist at Barclays Capital in London. “However, inflation is on a clear downward trend, easing the pressure on real household incomes. We expect the outlook for consumers to stabilize in coming months, barring further downside news,” and confidence is “probably at or close to its trough.”
Britons’ assessment of their present situation rose to 19 in December from 18, Nationwide said. An index of shoppers’ views on whether it’s a good time to make a major purchase, such as a house or a car, was unchanged. The report also showed that consumers have become more pessimistic on the housing market. They expect values to drop 1.3 percent in the next six months, compared with a prediction of a 1.1 percent decline in November.
Data yesterday showed that U.K. jobless claims rose for a 10th month to 1.6 million in December, the most since January 2010. In the quarter through November, the unemployment rate based on International Labour Organization methods rose to 8.4 percent, the highest since January 1996, from 8.1 percent in the three months through August.
Australia unexpectedly lost jobs for a second straight month in December, capping the nation’s worst year for employment in almost two decades, according to a report today. The number of people employed fell by 29,300 after a revised 7,500 drop in November, exceeding the median estimate in a Bloomberg News survey of 23 economists for a 10,000 increase.
Most European stocks gained today, extending a five-month high for the Stoxx Europe 600 Index, as Spain and France sold bonds at lower yields. The Stoxx 600 gained 0.3 percent as of 11:15 a.m. in London. France’s CAC 40 Index jumped 0.8 percent and Germany’s DAX rose 0.2 percent. U.S. stock futures were little changed.
France auctioned 7.97 billion euros ($10.3 billion) of two- , three- and four-year notes in its first sale of medium- and long-term debt after losing its AAA rating at Standard & Poor’s last week. Yields fell on all maturities. Spain sold 6.61 billion euros of bonds maturing in 2016, 2019 and 2022, compared with a maximum target for the sale of 4.5 billion euros.
U.S. consumer prices rose 0.1 percent after holding steady in November, according to the median forecast of 78 economists surveyed by Bloomberg before Labor Department data today. The Federal Reserve Bank of Philadelphia may say manufacturing in the Philadelphia region picked up in January. In New Zealand, consumer prices unexpectedly dropped 0.3 percent in the fourth quarter, government data showed.
The World Bank cut its global growth forecast this week, saying the economy has entered a “dangerous period.” The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, the institution said. It cut its U.S. growth outlook to 2.2 percent from 2.9 percent.
The Conference Board’s China leading economic index, which captures prospects for the next six months, rose the most in three months in December, adding to signs the slowdown in the nation’s growth is stabilizing as the government eases monetary policy.
In the U.K., Bank of England Governor Mervyn King has forecast that inflation will cool “sharply” in 2012, easing the squeeze on consumers as rising unemployment restrains wage growth. Robert Gardner, chief economist at Nationwide, said that while 2011 was “extremely tough,” there are some “positive developments on the horizon” in terms of slowing price growth.
“This should help to ease the squeeze on household budgets and help to lift spirits in the coming months,” Gardner said.
--With assistance from Scott Hamilton in London. Editors: Fergal O’Brien, Alan Crawford
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