Friday, January 28, 2011
Confidence-sapped consumers still spending
Posted by David Smith at 09:00 AM
Category: Thoughts and responses

The latest GfK-NOP consumer confidence survey is pretty bleak, with the overall confidence measure slumping from minus 21 in December to minus 29 in January. According to Nick Moon of GfK-NOP:

"January’s eight point drop represents an astonishing collapse in consumer confidence. In the 35 years since the Index began, confidence has only slumped this much on six occasions, the last being in the midst of the 1992 recession.

"The VAT increase is the first of the government’s austerity measures that has had a widespread impact on consumers, and it seems to have hit people's economic confidence hard, especially as the biggest drop was in consumers' appetite for major purchases. With inflation on the up and the full force of the cuts yet to hit, these figures could be the beginning of a very painful period."

The question is whether this makes consumers stop spending. Yesterday's CBI distributive trades survey showed a drop in the balance of retailers reporting higher sales than a year earlier but not a collapse. A balance of 37% of retailers reported high sales than a year earlier, down from 56% in December but still pretty strong.