Consumers continued to shake off the economic gloom of the
early summer according to the August Nationwide Confidence survey (CCI). The
gain in the headline rate mirrored the GfK August measure earlier in the month,
both rising by 4 points, the first monthly improvement for the CCI since April,
clawing back a quarter of the 16 point slump in May, June and July.
Unlike the GfK measure, the CCI is lower than a year ago
when the economy was still in recession suggesting that the economy will remain
very weak in the coming months.
While both surveys showed returning optimism both in
relation to personal finances and the economy, worries about the job outlook
and household income growth will constrain consumer spending.
Of the three sub-indices comprising the headline Nationwide
measure the Expectations Index gained 7 points on the month partly recovering
the 13-point fall in July. The Present Situations Index is unchanged on the
month but up on a year ago. More people believe there are many/some jobs
available (27%) than a year ago (18%).
A rise in people believing it to be a good time to make
major purchases – such as on a house or car boosted the Spending Confidence
Index – up from 96 to 100 on the month and well above its long-term average of
94. In the past 2 months 40% of adults believe it is a good time to buy
household goods - the highest level since last January. Growing awareness of
the rise in VAT next January may be having an impact on spending attitudes.
While the headwinds facing consumers are very strong and
actual spending is very cautious, the mood of consumers towards spending
continues to be relatively upbeat – with consumers seemingly believing there
are bargains to be found and discounts negotiated. However a lack of
cash/credit for purchases will be a key factor preventing window shoppers
In the latest Nationwide survey a near record low of
consumers (12%) expect household income to be higher in six months time and 15%
expect it to be lower. A year ago 14% of adults expected household income to be
higher and 13% lower.
Last year there was a big positive ‘back to school’ feeling
among consumers in the September surveys, with the economy moving out of recession
in Q4. This year the reverse may happen with consumer sentiment falling back as
more negative publicity about cuts and the threat of widespread strikes looms
resulting in the economy likely to be pushed back towards recession.
To be informed and know the beat of the consumer’s pulse
across the UK – why not discuss your market/consumer intelligence needs and
receive a complimentary copy of the Consumer Confidence Monitor.
Please ring John Gilbert on 0208 944 7510 / 07740 027968.