UK outlook for consumer spending remains weak despite easing of financial pressure on householdsAlliance Trust’s ongoing study of consumers’ financial wellbeing showed an improvement for the second successive quarter, as household budgets improved and consumers experienced an easing of their financial situation. Overall, however, economic activity remains very weak with negative GDP growth and rising unemployment. Given this backdrop, consumers are likely to continue to rein in spending this year in line with the state of their finances.
The improvement in Alliance Trust’s Financial Reality Index, a bespoke measure of consumer wealth, in the second quarter of 2009, has taken the Index to the highest level since the first quarter of 2008. The headline Financial Reality Index rose to 66.8 in the second quarter of this year, from the previous quarter when it rose to 59.0. With a history of falling continuously since mid-2007, the rise in the Index over the last two quarters is an encouraging result.
Shona Dobbie, Head of Alliance Trust Research, said, “Today’s results provide yet more hope to consumers that the critical situation they are in is beginning to ease slightly. However, they still remain under significant pressure, and although the index shows that household budgets have continued to improve, due to lower inflation and falling mortgage rates, this figure remains well below the critical level of 100. Our research suggests that the conditions facing consumers are still far from favourable, and they will continue to rein in their spending for some time to come.
Despite the ongoing improvement in our Financial Reality Index, the overall outlook for consumers is tough, with economic activity remaining weak and unemployment continuing to rise. Until this situation improves significantly, we cannot expect household expenditure to improve markedly, and we anticipate that consumer spending will remain weak through the remainder of 2009.”
View the full press release here
Download UK Financial Reality Index – Q2 2009
Visit the Alliance Trust Research Centre here