In the first of two contradictory surveys published this week, the Bank of England reports a surge in consumer credit in September – up 1.1% compared with August’s 0.9%. In the year to date, consumer credit is 12.9% up on the 2000 level.
A clear sign, optimists believe, that Britons’ confidence in their economic prospects remains undented by world events: a view supported by an 0.8% growth in mortgage lending during the same month.
But every silver cloud has an Stygian lining, insist the pessimists. Britain's upbeat economy is, they fear, bolstered by an unsustainably high level of consumer debt. The gloom scenario painted by the Jonahs is that higher interest rates will hit the UK in 2002 concomitant with a substantial rise in unemployment.
This combination would abruptly zip the wallets of millions of high-debt consumers, triggering an adverse effect on Britain’s economy just as the rest of the world is recovering from the current recession.
And now for the bad news!
According to research conducted by GfK for the European Commission, UK consumer optimism plummeted in October to its lowest level since the nation’s fuel crisis last year. GfK’s Consumer Confidence Barometer fell to minus five compared with minus one in September and +6 in June.
The data, collected during the first three weeks of October, is a graphic indicator of the swing in consumer attitudes since the events of September 11. The study also reveals gloomy employment expectations, with 61% of respondents believing unemployment will rise during the next twelve months.
Confidence in the future of the general economic situation, fell to its lowest point since the last major recession in 1990. According to Roger Wright, managing director of consumer and business research at GfK: “It doesn't look good - this is really quite negative news. I haven't seen it this bad for a long time.”
News source: Financial Times; BBC Online Business News (UK)