Consumer spending has remained resilient
This recession has been a strange consumer experience, with strong indications that the UK consumer has remained resilient throughout the downturn.
Is this real or the calm before the storm?
The rise in unemployment has been skewed towards the younger members of the community. There are some black spots that have been hit hard by large-scale closures, but for many, the last 18 months has given people more money in their pockets (through lower mortgage rates) than they have ever had!
What have you been doing with the money?
Some have used the opportunity to payoff unsecured debt such as credit cards or reduce their mortgage. However, we are starting to witness some signs that the consumer is returning back to the high street.
How will the consumer react to the age of austerity by Government?
Although the details of the major political party budget policies are kept deliberately sketchy they are now all agreeing that we will need to cut our public spending significantly.
Cut expenditure and raise taxes!
As well as cutting expenditure, the next Government will be forced to raise taxes across a range of significant areas. In short, the UK will become an increasingly expensive / difficult place to live - so what will this do to the consumer recovery?
Are we going through a ‘w’ shaped recession?
I think that a growing number of analysts believe that the UK is going to go through a ‘W’ shaped recession with perhaps the second dip being much worse and prolonged than the first. The road to financial stability will be a long and hard journey with the Taxpayer being required to pay a high price for the privilege.
Are the cracks beginning to appear?
On Friday, the UK reported smaller than expected retail sales figures, which perhaps signals that consumer confidence had still not returned to the expected levels. The international financial community reflects this hesitancy with Bloomberg reporting that the UK had the worst outlook for Global investors amongst the developed economies.
Not out of the woods – by a long way!
The economic signals are growing which show that the UK still has a significant number of challenges ahead and radical financial austerity measures will be required in order to secure a recovery.