6 May 2009

 

CONSUMERS’ FINANCIAL WELLBEING SHOWS GLIMMER OF HOPE

 

Alliance Trust’s ongoing study of consumers’ financial wellbeing showed a slight up-tick in the first quarter of the year as household budgets improved. Overall, however, consumers remain under pressure and are likely to continue to rein in spending in line with the weak state of their finances.

 

Alliance Trust’s Financial Reality Index, a bespoke measure of how well off consumers are, showed a small improvement in the first quarter of 2009, a glimmer of hope that took it to the highest level since the second quarter of 2008.  The headline Financial Reality Index rose to 59.0 in the first quarter of this year, from the previous quarter when it dropped to just 34.5 – a record low since the study began in 1997. The index had been falling continuously since mid-2007.

 

Alliance Trust Research Centre Head Shona Dobbie said, “Results from our first quarter give faint hope to consumers that the critical situation they are in is beginning to ease slightly but they remain under serious pressure. Although the index shows a definite improvement in household budgets because of lower inflation and falling mortgage rates, this figure is still not above the critical level of 100 that would give them genuine relief.

 

With the other main factors that affect their wellbeing, namely the economic background and their net wealth, remaining almost unchanged, the outlook for consumers is still tough. Our index has been a good predictor of future trends in consumer spending over the last 12 years and we expect household expenditure to remain muted over the rest of the year.”

 

 

The main findings of the first quarter Financial Reality Index were:

 

  • The economic background slipped from 66.9 to 61.7, a new record low. This was pulled down by GDP falling by 2.0% quarter on quarter, and a rise in the unemployment rate.

 

  • Household budgets improved significantly from 34.2 to 90.4 due to lower rates of inflation that are boosting real income and lowering basic costs. Despite the rise, this remains below the critical level of 100.

 

  • Net wealth showed only minimal improvement rising from 2.5 to 4.1 reflecting further falls in house prices and ongoing weakness in equity markets, while high levels of debt remain a serious issue for many households.

 

The full Financial Reality Index factsheet is available at www.alliancetrust.co.uk/research

 

Contacts

Jane Holligan, Media Relations Manager          Clare Dundas/Anjali Unnikrishnan

Alliance Trust                                                    Finsbury

Tel  +44 (0)1382 306064                                   Tel  +44 (0)20 7251 3801

Mobile  07793 296813                                      Email  alliancetrust@finsbury.com

Email  jane.holligan@alliancetrust.co.uk      

Web www.alliancetrust.co.uk

 

 

Notes to editors

 

  1. Alliance Trust PLC is a self-managed investment company with investment trust status. A FTSE-100 company, it is the largest generalist UK investment trust by assets listed on the London Stock Exchange.

 

  1. Founded in 1888, the company is based in Dundee and has offices in Edinburgh and London.

 

  1. The Research Centre is part of Alliance Trust and was formed to carry out economic and social analysis to deepen our understanding of economies, markets and socio-economic issues.

 

  1. Photographs of Shona Dobbie are available.