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Fall in consumer confidence

Consumer confidence fell in the last quarter of 2009 with nearly a third of consumers expecting the economy to get worse this year, according to research published today by the Association of British Insurers.

 

Of 2,500 adults questioned, 31% expected the economy to worsen in 2010 with only 39% being optimistic – a sharp fall from the 52% recorded in the previous quarter.

 

There was a rise of 4% to 31% in the numbers who said they were concerned about job security. The result of this has been a concerted move by many consumers to pay off existing credit card debts and other loans in an attempt to get back on an even financial keel, in preparation for what they see as a worsening of the economy. In fact 42% of those questioned have started paying back non-mortgage debts compared to only 34% a year ago.

Consumer pessimism is causing more to pay off their debts.

Consumer pessimism is causing more to pay off their debts.

 

Also, a fall in the plans of consumers to save has been noted. Of those saving regularly, only 17% expect to be saving more this year  which is a fall from the 24% recorded in the last quarter.

 

According to Dr Rebecca Driver, the ABI’s Director of Research and Chief Economist: “Despite continued fiscal and monetary policy intervention, consumer perceptions of the economic prospects and their own job security in 2010 have deteriorated.

 

“Seven-in-ten people feel that they would cope badly financially if they lost their job, with four-in-ten admitting that they had not made adequate financial provisions to enable them to cope with a large, unexpected expense. This is not because people are spendthrift – the majority would prefer to go without than get into debt…”

 

At the moment it seems as though consumers are choosing to run down savings to pay off debt rather than looking to increase their consumption spending.

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Posted in Consumer Expenditure, savings, unemployment

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