Consumer spending set to slow

Consumer spending is set to slow next year as rising interest rates eat into people's disposable income, research claimed today.

The UK's feel good factor is also falling as rising unemployment, a cooling housing market and bad weather over the summer all combine to hit consumers' mood, according to information group Experian.

The group said the majority of UK regions had seen a decline in consumer confidence during the past few months, with East Anglia and the south-east leading the way.



It said levels of confidence had fallen by 15% in these regions during the past year, largely as a result of the property boom coming to an end.

Consumers across southern regions are expected to curb their spending on major purchases, such as cars, televisions, white goods and computers over the coming 12 months.

Experian said strong house price increases over recent years had enabled homeowners to borrow increasingly large amounts of money relative to their earnings.

But it warned that rising interest rates were now likely to lead to people in these areas cutting back on non-essential spending in order to cover their increasing mortgage repayments.

It said this was particularly likely to be the case in the debt laden south-east and London.

By contrast people in Scotland, where house price growth has been less dramatic, and people in the West Midlands are most likely to be planning a major purchase over the coming 12 months.

Overall levels of confidence remain highest in Scotland, where 26% more consumers say they feel confident compared with those who do not, followed by Northern Ireland at 23%.

The south-east and south-west are the two least confident regions, where just 13% more people feel positive than those who feel negative.



Melanie Lansbury, associate director at Experian's Business Strategies division, said: "Consecutive rises in interest rates have already hit consumer confidence across most parts of the country.



"Consumers are becoming increasingly cautious about spending on big-ticket items and, with more rate rises likely, further confidence falls over the coming 12 months are a distinct possibility."



· GfK questioned 6,000 people between April and June