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Economy in Brief

UK Consumer Confidence Is Challenged By Electioneering
by Robert Brusca May 28, 2010

According to the Nationwide Building Society’s measure, U.K. consumer confidence fell in March by the most since July 2008 as the election due within weeks fueled Britons’ doubts about the economy. Small surprise that is: so much for politicians shoring up a feeling of hope and security. Increasingly elections are about making the opponent seem worse than you are. The consumer confidence polls seem to have picked up on this, with the obvious consequences. The index of sentiment fell 9 points from February to 72, erasing the gains in confidence seen so far this year. A gauge measuring expectations for the economy in the next six months fell 11 points to 105.This fall disappointed as the market consensus level was a reading of 81.

We contrast this result with the GfK survey above. It seems to show less of hit from the electioneering effect but it does demonstrate some backsliding in the assessment of the economy; plenty of raw nerves here for the politicians to tap into. The household financial situation eroded in March as did people’s assessment of their savings. Both lower and higher income respondents saw a worsening.

Looking ahead, fears of unemployment have been rising. The general economic situation is seen as poorer and households expect their financial situation to deteriorate further. There are increased concerns about savings adequacy and growing concerns about inflation.

With this as a back-drop there is plenty of fodder for election politicking to push all the consumers’ buttons. This appears to be in train. Still consumer confidence in the GfK measure is in the 92nd percentile of its two-year range showing considerable progress has been made, but that compares to a standing of just 60% in its 10_year range which emphasizes a bit more how far there is to go. Clearly the UK consumer remains challenged and will find his and her senses assaulted in this election season. May the least worse man win.

GFK Consumer Survey
          Of 2Yr Of 10Yr
  May-10 Apr-10 Mar-10 Feb-10 Range Range
Consumer Confidence -18 -16 -15 -14 80.8% 55.3%
Current
Household Fin Sit 16 17 18 18 25.0% 18.2%
Major Purchases -21 -20 -17 -16 71.0% 36.7%
Last 12 Months
Household Fin Sit -13 -14 -15 -13 43.8% 29.2%
General Econ Sit -45 -47 -49 -50 94.9% 53.6%
CPI 72 79 72 63 26.9% 40.6%
Savings -5 -7 -13 -6 37.7% 29.9%
Next 12-Months
Household Fin Sit -3 2 4 6 62.5% 46.9%
General Econ Sit -9 -1 0 4 76.8% 76.8%
Unemployment 36 33 36 31 11.1% 27.3%
Major Purchases -26 -27 -28 -31 82.4% 56.0%
Savings 2 1 5 7 29.4% 19.2%
CPI 71 67 63 60 60.8% 60.8%
By Income
Lower -24 -22 -21 -18 77.8% 50.0%
Upper -11 -8 -5 -3 72.4% 55.3%
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