Although the Nationwide consumer confidence index fell by 5 points in December to 96, an increasing number of consumers expect house prices to rise, the index revealed on Wednesday.

Peoples’ optimism about house prices has continued to improve steadily throughout this year with the Consumers’ House Price Forecast showing that consumers expect house prices to rise 3.2% in the next six months – this is the biggest rise seen since Nationwide began measuring consumers’ expectations of house prices in January 2005.

Confidence index

The December fall back of 5 points in the index followed a record 9-point rise in November. While people’s overall confidence levels are above the lows recorded in the Autumn, a three month rolling average suggests that the steady decline in confidence seen since the Spring may now be bottoming out. Looking forward, consumers appear somewhat more optimistic with 80% expecting their family finances to be either the same or better in 2006 than they were in 2005.

Although expectations for the future are fairly upbeat compared to recent months, they are less rosy than in early summer when the combined poor performance of retailers and the London bombings seemed to depress the spirit of the nation.

Consumers’ sentiment seems to have been particularly cheerless in the run up to Christmas when Nationwide’s figures show people’s confidence in the present economic situation reached its lowest ever level. December’s decline in all four of the indices echoes a similar – though less marked – fall seen a year ago in three of the four measures. This suggests that for many the run up to Christmas is not necessarily a season of good cheer.

Stuart Bernau, Nationwide’s executive director, said: "The gloomy view among consumers is perhaps not surprising given that over the last 12 months GDP has almost halved, it also suggests that as we approached the year end people may have re-appraised their situation and become more realistic about the future."

"However, with the speculation of a fall in interest rates and recent figures showing that the appetite for new debt has fallen to its lowest level for 11 years we may begin to see a slight shift in consumers’ attitudes."

The Nationwide Consumer Confidence Index is compiled in partnership with TNS, the market research group that conducts the research for the US index.