Consumers 'caught off guard' by economic downturn

Consumers are struggling with their expenses because the sudden downturn of the economy caught them off guard after a long period of stability, it has been claimed.

Darren Cook, head of public relations for financial advisor Moneyfacts, said that the economic situation had gone from one extreme to the other.

"It's only now in the last three to four months that it has knocked on the front door and actually affected the consumer. If that change had happened gradually in 12 to 24 months then people would have been able to adapt their household expenses," he said.

Mr Cook added that people now have less money to spend on luxuries and even small essential goods due to their income being swallowed up by utility bills and mortgage repayments.

He also recommended that the Bank of England should increase the base rate to counter spending and encourage saving.

The Consumer Confidence Index released in July by Nationwide and TNS showed that overall consumer confidence was 18 per cent lower than the previous month and 46 per cent lower than the same period a year ago.

Some 61 per cent of people said they believe the economic situation is bad and 85 per cent said they think it will still worsen in six months.