Consumer Optimism Increasing
Wednesday September 30th 2009
Consumer confidence rose sharply in September to be at its highest level since January 2008 and reversing declines over the last five quarters, according to the GfK NOP consumer confidence index.
The index jumped 16 points in September after sticking at -25 over the previous three months. This was up from -27 in May and -37 in January.
However, the figures are still markedly down on the long-term (34-year) average of -8. The all-time low of -39 occurred in July 2008.
September's sharp rise in consumer confidence was led by substantially increased optimism over the general economic outlook for the next 12 months.
Howard Archer, economist with Global Insight, said: “This is obviously very welcome news and is clearly a reflection of recent significantly improved economic data, low interest rates and reduced inflation.”
He suggested consumer spending, particularly on ‘big-ticket’ items like TVs and cars, may expand in the fourth quarter as consumers attempt to beat the VAT tax rise up from 15.0 per cent to 17.5 per cent.
But Archer cautioned: “For a start, higher confidence does not necessarily translate into higher spending, even allowing for the marked rise in the climate for making a major purchase component in September. Furthermore, consumer sentiment is still relatively low compared to long-term norms and consumers still face serious head winds, which are likely to limit the upside for personal expenditure for some time to come.”