Growing confidence should drive spending

Growing confidence should drive spending
by
Today I can report some positive news from the February figures of YouGov’s Household Economic Activity Tracker (HEAT). Consumer confidence continues to rise with the overall HEAT Index (a composite of eight current and forward looking metrics) moving from 92 to 93. This may be a small increase, but the real story is that the rise that we saw in January (up from 88 in December) has been sustained and is now five points higher than in December – as well as eight points higher than a year ago.

As we dig deeper into the eight measures, we see a very clear picture emerging – consumers’ personal situations have not improved (the household financial situation has dropped from 80 to 79, and job security from 88 to 85) but they are seeing a big increase in business activity at work and have greater confidence in the future than for many months.

Business activity, which fell in the autumn as fears about the euro-crisis deepened, rose from 101 to 105 and is now nearly at the levels of October 2011. Despite the slight decline in household financial situations, expectations for the same in 12 months are at the highest level since August 2010.

So the momentum is definitely positive, but the next few months will be crucial in resolving the tension between slightly worsening situations and improving confidence. The hope is that the latter will win out to boost spending and lead to a virtuous circle of confidence – driving activity that will drive further confidence.

This article also appears in City AM

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See more on YouGov’s Household Economic Activity Tracker

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