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Consumer spending outlook improves slightly

Consumer spending outlook improves slightly

Category: Mortgages

Updated: 04/08/2009
First Published: 22/07/2009

MONEYFACTS ARCHIVE
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Consumers' financial situations improved between April and June, the second successive quarter rise in a row, with low interest rates and falling inflation helping to increase household budgets.

The findings are part of the Alliance Trust's study of Britons' wealth, which reported that the current situation is the healthiest seen since the first three months of last year.

These welcome findings have been driven by a combination of lower rates of inflation that are boosting real income and lowering basic costs, and lower mortgage rates which are helping boost household budgets.

The Financial Reality Index rose in the second quarter of the year – the measure's second successive rise following consecutive falls since mid-2007.

However, as with all with any recent improvements, the findings were tempered with warnings that conditions are still historically tough and real progress could yet be some way off.

Economic activity remains very weak and, in a recession, consumers are likely to keep a tight check on their spending, reining it in wherever possible

"Today's results provide yet more hope to consumers that the critical situation they are in is beginning to ease slightly," said head of research at Alliance Trust, Shona Dobbie.

"Despite the ongoing improvement in our Financial Reality Index, the overall outlook for consumers is tough, with economic activity remaining weak and unemployment continuing to rise.

"Until this situation improves significantly, we cannot expect household expenditure to improve markedly, and we anticipate that consumer spending will remain weak through the reminder of 2009."

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