The nation’s consumers are having a bit of a crisis. They’ve lost their urge to splurge. In the confidence stakes (cue extended metaphor), UK shoppers are the wallflowers at the school dance, hanging their heads, picking their acne and shrinking away from the reflected glare of the disco ball. That’s how bashful they are.
The cause? Rising unemployment, almost nonexistent economic growth and soaring energy bills. The cost of living is moving inexorably higher and, with inflation at 5.2%, household outgoings are increasing at more than twice the pace of underlying wage growth.
No wonder the great British public is tightening its belt.
Latest figures show that consumer confidence index fell three points in September to 45 points, 10 points lower than last year. Nationwide’s chief economist Robert Gardner commented on today’s findings: ‘The index now lies perilously close to its all-time low reading of 41, which was recorded in February this year,’ he says.
Gardner remains conservative on his predictions for improvement too: ‘The difficult jobs market situation is likely to continue to weigh heavily on confidence in the months ahead.’
Economic doom and gloom dominates the headlines at present. The Eurozone crisis seems to escalate daily; the latest news is that talks between French President Nicolas Sarkozy and German Chancellor Angela Merkel have broken down. A second EU Summit has already been scheduled for Wednesday in anticipation of stilted negotiations over the fate of the euro this weekend.
On Saturday, ministers from all 27 EU countries will have a chance to put forward their proposals. Then, on Sunday, the real fun begins. EU leaders will need to agree on a second bailout strategy for Greece, figure out how to recapitalise the banks, and lay a framework for a stronger international bailout fund. A walk in the park, then. Jurassic Park that is.
Something is rotten in the UK, Europe, the world. And only 15% of households believe there will be any improvement over the next six months. Even the glimmer of hope presented by yesterday’s rise in retail sales – albeit a barely there 0.6% - can’t lift the markets’ spirits.
Trying to look on the bright side (it is Friday after all) a good meaty crisis like this does present a great opportunity to shake up old and often stagnant ways, ditching the deadwood and revivifying tired organisations – to the long-term benefit of all. But it’s the short-term everyone’s worried about at the moment, and it’s hard to be too optimistic about that...