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UK consumer confidence drops as base rates could rise

UK consumer confidence has fallen this month to its lowest level since April, with people less enthusiastic about the economic situation.

The fall is revealed in the latest monthly barometer conducted by pollster GfK on behalf of the European Union. GfK's UK consumer confidence index dipped from plus-1 in June to minus-2 in July, having been at zero in May.

The deterioration mainly reflected a shift in consumers' view of the general economic situation over the last 12 months and the coming year, although sub-indices covering people's personal financial situations, past and future, and the climate for major purchases also fell.

Nick Moon, managing director of social research at GfK, said: "No sooner had the index crossed into positive territory last month - for the first time in nearly 10 years - than it fell back into the negative. All five of the component parts of the index fell this month, with four-point drops in both the questions about the country's general economic situation being particularly noticeable.

"The almost relentless rise of the last six months couldn't continue indefinitely, and the government will be hoping this is just a temporary setback rather than the forerunner of a wider decline in confidence."

The drop in confidence has come as speculation has mounted that the first rise in UK base rates from their record low of 0.5 per cent may not be far away. Economists are expecting an increase later this year or in early 2015.

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