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Economy in Brief

by Robert Brusca UK Consumer Confidence Drops to -3 in June from -2June 29, 2007

The UK measure of confidence has been stuck in range of zero to -8 since late 2005. Around March of this year it began to rise strongly. June is its first setback after two straight months of increase. While that does not seem like much the last time the UK index was as strong as -3 was June of 2006. It was last higher than -2 in July of 2005. So the index has come a long way in two short months.

Current conditions have improved only marginally with the household financial situation up to 25 in June compared to 23 in March when the index read -8. Major purchase plans are up to +6 from 2 in March. One big change is the assessment of the general economic situation. It stood at an index level of -33 in March but by June was at -24. The outlook readings continue to be more negative than the current situation or the view of the past. But since March these readings have improved considerably.

The economic situation ahead is assessed at -10, up strongly from -21 in March. Unemployment prospects are down to 29 from 32. The Household Financial situation is at 13 in June, up from 10 In March

Much of the improvement is on expectations. Current conditions have improved and a reassessment of the past has also improved the sense of the economy’s position.

On balance, the view of the past twelve months is very strong with savings and the household financial situation as a strong a set of responses as we ever see. The current financial situation is as good a response as we have seen as well, right at the top of its range. Current plans for major purchases are only about mid-range however – or weaker when compared to a longer history. As to the outlook The general and household situation plus prospects for savings score firm to strong readings with the household financial situation at the 85.7th percentile and the economic situation at the 76th percentile and savings in the 72nd percentile. Unemployment prospects are in the 44th percentile, indicating a mildly positive outlook, with fear of unemployment at less than average, but by a small margin. Major purchases ahead are in the bottom quarter of their range, however. As to income groups, upper and lower income groups have about the same assessment of circumstances and prospects.

GFK Consumer Survey
          % of 2Yr % of 10Yr
  Jun-07 May-07 Apr-07 Mar-07 Range Range
Consumer Confidence -3 -2 -6 -8 66.7% 43.8%
Household Financial Situation 25 25 22 23 100.0% 100.0%
Major Purchases 6 4 6 2 47.6% 34.5%
Last 12 Months
Household Financial Situation 3 3 0 0 100.0% 66.7%
General Economic Situation -24 -18 -28 -33 50.0% 48.1%
CPI 64 64 64 68 81.8% 87.1%
Savings 36 35 28 35 100.0% 100.0%
Next 12-Months
Household Financial Situation 13 13 11 10 85.7% 75.0%
General Economic Situation -10 -10 -18 -21 76.5% 80.0%
Unemployment 29 28 30 32 44.4% 58.3%
Major Purchases -21 -16 -16 -21 25.0% 10.0%
Savings 20 16 12 20 72.7% 88.9%
By Income
Lower -6 -10 -14 -16 71.4% 52.6%
Upper 4 2 5 4 72.7% 80.0%
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