Nick Moon, MD of GfK NOP Social Research, comments: "January's eight point drop represents an astonishing collapse in consumer confidence. In the 35 years since the Index began, confidence has only slumped this much in a single month on six occasions, the last being November to December 1994.
"The VAT increase is the first of the government's austerity measures that has had a widespread impact on consumers, and it seems to have hit people's economic confidence hard, especially as the biggest drop was in consumers' appetite for major purchases. With inflation on the up and the full force of the cuts yet to hit, these figures could be the beginning of a very painful period.
"There is a chance that these figures represent a post-Christmas blip, but even if there is a rally in February it is extremely unlikely that it will reverse this massive drop. Today's figures, when combined with the bleak economic forecast, will make talk of a double dip recession unavoidable."
The overall index score this month has dropped eight points to -29, 12 points lower than this time last year. All 5 measures decreased this month, the most notable decrease in the "major purchase index". The annual moving average drops 1 point to -19.
| Measure | Movement | January 2011 | December 2010 | January 2010 |
|---|---|---|---|---|
| Overall Index Score | down 8 | -29 | -21 | -17 |
| Personal financial situation over last 12 months | down 2 | -18 | -16 | -14 |
| Personal financial situation over next 12 months | down 4 | -12 | -8 | 4 |
| General economic situation over last 12 months | down 3 | -54 | -51 | -57 |
| General economic situation over next 12 months | down 7 | -30 | -23 | -2 |
| Climate for major purchases | down 22 | -29 | -7 | -16 |
The index measuring changes in personal finances during the last 12 months has decreased 2 points this month, at -18; this is 4 points lower than this time last year.
The forecast for personal finances over the next 12 months decreased 4 points to -12; this is 16 points lower than January '10.
The measure for the general economic situation of the country during the last 12 months has decreased by 3 points to -54; 3 points higher than this time last year.
An expectation for the general economic situation over the next 12 months has decreased by 7 points to -30: 28 points lower than January 2010.
The major purchases measure has decreased by 22 points to -29; 13 points lower than this time last year.
The 'now is a good time to save' index has increased 5 points to -5, which is 3 points lower than January 2010.
Research carried out by GfK NOP on behalf of the European Commission.
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