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Jan. 6 (Bloomberg) -- U.K. consumer confidence fell in December by the most in more than a year as expectations for the economy deteriorated, Nationwide Building Society said.

The index of consumer sentiment declined five points from the previous month to 69, the biggest drop since November 2008, the customer-owned lender said in an e-mailed statement today. A measure of consumers’ economic expectations in the next six months fell eight points to 101.

With December marking the annual Christmas season peak for shopping, the report may signal a setback for retail spending as consumers brace for higher taxes to curb Britain’s record budget deficit. Prime Minister Gordon Brown is trying to revive the economy and restore support among voters in time for an election due by June.

“An element of caution may have begun to creep back into the minds of consumers,” Nationwide Chief Economist Martin Gahbauer said in the statement. “Lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn.”

A gauge of whether consumers think it’s a good time to make big purchases dropped to 106 last month from 107 in November, Nationwide said.

Chancellor of the Exchequer Alistair Darling said last month he will require higher tax contributions next year. This month, value-added tax returned to 17.5 percent from 15 percent, reversing a year-old measure. The Conservative opposition had a 10 percentage-point lead over Brown’s Labour Party in a YouGov Plc poll released Jan. 1.

Tax Impact

“The looming VAT hike and other tax changes announced in the pre-budget report may have impacted on confidence in December, forcing people to review their expectations for the future,” Gahbauer said.

Unemployment growth is still slowing as the economy revives. A separate report today by KPMG and the Recruitment and Employment Federation showed that a measure of hiring for permanent jobs grew at the fastest pace since July 2007 in December, rising to 62.8 from 61.7 the previous month.

Meanwhile, prices of goods in U.K. shops advanced 2.2 percent in December from a year earlier after a 0.2 percent increase the previous month, the British Retail Consortium said in a separate report today. Food prices rose an annual 3.7 percent while non-food prices gained 1.4 percent.

The Bank of England will maintain its program of purchasing bonds with newly-created money at 200 billion pounds on Jan. 7, according to all 35 economists in a Bloomberg News survey. Policy makers will also keep the benchmark interest rate at a record low of 0.5 percent, 53 economists said.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.
Last Updated: January 5, 2010 19:01 EST

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* Yahoo! Buzz Jan. 6 (Bloomberg) -- U.K. consumer confidence fell in December by the most in more than a year as expectations for the economy deteriorated, Nationwide Building Society said.

The index of consumer sentiment declined five points from the previous month to 69, the biggest drop since November 2008, the customer-owned lender said in an e-mailed statement today. A measure of consumers’ economic expectations in the next six months fell eight points to 101.

With December marking the annual Christmas season peak for shopping, the report may signal a setback for retail spending as consumers brace for higher taxes to curb Britain’s record budget deficit. Prime Minister Gordon Brown is trying to revive the economy and restore support among voters in time for an election due by June.

“An element of caution may have begun to creep back into the minds of consumers,” Nationwide Chief Economist Martin Gahbauer said in the statement. “Lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn.”

A gauge of whether consumers think it’s a good time to make big purchases dropped to 106 last month from 107 in November, Nationwide said.

Chancellor of the Exchequer Alistair Darling said last month he will require higher tax contributions next year. This month, value-added tax returned to 17.5 percent from 15 percent, reversing a year-old measure. The Conservative opposition had a 10 percentage-point lead over Brown’s Labour Party in a YouGov Plc poll released Jan. 1.

Tax Impact

“The looming VAT hike and other tax changes announced in the pre-budget report may have impacted on confidence in December, forcing people to review their expectations for the future,” Gahbauer said.

Unemployment growth is still slowing as the economy revives. A separate report today by KPMG and the Recruitment and Employment Federation showed that a measure of hiring for permanent jobs grew at the fastest pace since July 2007 in December, rising to 62.8 from 61.7 the previous month.

Meanwhile, prices of goods in U.K. shops advanced 2.2 percent in December from a year earlier after a 0.2 percent increase the previous month, the British Retail Consortium said in a separate report today. Food prices rose an annual 3.7 percent while non-food prices gained 1.4 percent.

The Bank of England will maintain its program of purchasing bonds with newly-created money at 200 billion pounds on Jan. 7, according to all 35 economists in a Bloomberg News survey. Policy makers will also keep the benchmark interest rate at a record low of 0.5 percent, 53 economists said.