Confidence up despite a new GDP downturn

Tim Wallace
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CONSUMERS are increasingly confident and feel more secure in their jobs than they did three months ago, according to a study out today, despite the UK officially returning to recession in the last quarter.

Deloitte’s consumer tracker shows a fragile picture and only a small improvement on the final quarter of 2011, but does expect the UK to avoid any further quarters of GDP contraction.

The study shows 18 per cent of people feel less secure in their job this quarter, down from 24 per cent three months ago.

Similarly the number feeling pessimistic about personal debt has fallen from 25 per cent to 22 per cent, and fewer people are buying cheaper products – 27 per cent traded down, compared with 32 per cent in the previous quarter and 40 per cent in the third quarter of 2011.

However the outlook remains sluggish – 51 per cent are pessimistic about their household’s disposable income, which is holding back a sustained consumer recovery.

Deloitte’s chief economist Ian Stewart warned that the picture is only likely to change slowly.

“For consumers to spend more, disposable incomes need to improve. Wages are unlikely to see much growth this year, so the big hope is that sharply lower inflation will support consumer spending power,” he said.

“If inflation drops in the second half of this year, the UK consumer should see some modest growth. Yet the UK consumer remains vulnerable to events, particularly an intensification of the euro crisis or further rises in oil and energy prices.”