Spending cuts announced in the Comprehensive Spending Review in late October pushed confidence lower by 2 points in November to –21. At this level confidence is again in the low/no GDP growth region, with the need for a boost. Four of the five sub- measures apart from the backward looking measure of personal finances - comparing now with 12 months ago - (unchanged), fell during the month. The biggest drop is in expectations of personal finances in the next 12 months, down 5 points to –7 and 12 points lower than a year ago. This reflects concerns about job prospects – with the headline unemployment measure down 3 points on the month, but with a big jump from 33% to 40% in the number of adults who expect unemployment to rise sharply in the next 12 months.
Spending confidence slipped back as budgets continue to be squeezed, both by low earnings growth from work, rising inflation and low interest on savings. Fewer households are saving this month.
Increasingly consumers have turned pessimistic about future economic prospects. The November measure of economic sentiment is down 2 points on the month but down 25 points on a year ago. The boost of a Royal Wedding may help to make people feel better in the coming months, but the evidence earlier in the autumn is that an England World Cup bid win will certainly boost confidence, with some 40% of adults believing this to be the case –especially among lower income groups and young people.
Without a World Cup bid win prospects for growth in the early part of 2011 look very uncertain, although some heart should be taken from the economic performance of the European Union (especially Germany experiencing near boom time conditions) where economic sentiment is now above its long run average and growth expectations have been raised for 2011.
JGFR produces a regular monthly commentary on the mood of the UK consumer in The Consumer Confidence Monitor. This is produced in two versions, a High-income version (over £50,000 household income) and a regular (all adult) version.
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