The autumn boost in consumer confidence is quickly fading as people become aware of the cold financial climate coming later in 2010. This month’s Nationwide headline consumer confidence index (CCI) is 8 points lower (70) than in November (78) and is the second successive month confidence has fallen – as in the GfK survey in late December (down 2 points to –19). In both surveys optimism about economic prospects – a feature of the autumn surge in confidence – fell back sharply.
Both surveys – but especially the Nationwide survey – show a weaker jobs outlook which had been strengthening in recent months. The autumn improvement is reflected in official figures showing fewer job losses than many economists and commentators were expecting.
In the Nationwide survey the net balance of people thinking there are currently many/some jobs available fell from –45% to –51% on the month while the net balance of people thinking there will be many/some jobs available in 6 months time fell from --25% to -28%.
In the GfK survey, that asks people about the expected number of unemployed people in the next 12 months, a net balance of 61% expect unemployment to rise compared to 58% in November, although well down on 81% a year ago.
Consumers more pessimistic employment outlook contrasts with recent business surveys that suggest an improvement in job openings in the coming months. Many companies have negotiated fewer hours and lower pay as an alternative to job losses and will be hoping to see through the recession. Much will depend on the strength of economic recovery as to whether firms will be able to continue to hoard jobs and consider creating new jobs. This months preliminary Q4 GDP release will be a key data release to gauge the likely strength of recovery.
Weakening confidence suggests growing uncertainty feeding into a more cautious approach to spending – and a greater preference for saving. The surge in post-Christmas store sales may reflect pent up ‘retail therapy’ on perceived bargains before a year of austerity sets in. The current weather will help to foster such behaviour with more income spent on heating bills.
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