Little hope that household consumption is going to rise any time soon
Bad news about household consumption in the monthly consumer confidence poll and house price data released today.
The GfK/NOP Consumer Confidence Index fell slightly, to minus 20, from minus 18 in August (and minus 16 in September 2009).
- The index for how people felt their personal financial situation had changed over the previous 12 months fell to minus 5, from minus 3 last month (and plus 5 in September 2009).
- The index for how they judged the general economic situation over the next 12 months fell to minus 19 from minus 14 last month (and plus 4 in September 2009).
Consumer confidence is a rather volatile economic indicator, but these figures do suggest that consumers are worried both about the state of the economy and their personal position.
The latest results for the Nationwide House Price Index also made depressing reading. The index rose slightly compared with the previous month, but the three month on three month rate of change (which Nationwide describe as “a good indicator of the near term price trend”) fell from 0.0 per cent in August to min us 0.9 per cent.
It’s a sign of how starved we are for good numbers that the Financial Times reported (paywall) the fact that we have stagnation instead of an outright fall as good news. Martin Gahbauer, the Nationwide’s Chief Economist predicted that employment changes would play an important part in determining the future direction of the housing market:
Given the combination of a still elevated unemployment rate and the upcoming public sector wage freezes, it seems unlikely that earnings growth will accelerate much in the near future. While this will continue to help companies limit job losses, it will also continue to constrain confidence in future incomes among potential homebuyers.
The Nationwide and the GfK/NOP indices are both pointing in the same direction – depressed consumer confidence. Household demand is falling at the same time as public spending – the coalition had better pray that the cuts really do “crowd in” business investment, because that is their only hope.