No sign of consumer confidence
Employment prospects are starting to look reasonably good in manufacturing and, to a lesser extent, business services, but those two industries by themselves won’t generate the jobs and growth we need. Earlier this week, the monthly report from the Bank of England’s Agents noted that employment prospects in retailing and consumer services firms had dipped,
reflecting rising uncertainty about the outlook for household spending.
Frankly, today’s news won’t have changed anyone’s minds in these businesses.
First, there was the Nationwide’s Consumer Confidence Index, which fell back two points, though it is still a little higher than the record low it scored in February. About the best thing you can say about this Index at the moment is that it’s pretty stable, but at a very low level. As the Nationwide commented,
Clearly, consumers are still feeling downbeat about the current situation and there is little to suggest that they expect things to improve much over the coming months.
The past 12 months have seen confidence progressively fall back towards the lows recorded during the recession. It now seems fairly safe to say that the up tick we saw in March was not the beginning of any sustained resurgence in confidence. It may be some time yet before we begin to see this emerge.
The second straw in the wind came from the Council of Mortgage Lenders, who reported that mortgage lending in April was down 14 per cent from March – and even down 5 per cent from April 2010. The CML points out that this may have something to do with the extra holidays due to the combination of Easter and the Royal Wedding; even so, this is remarkable. As I’ve noted before, mortgage rates (though not as low as the Bank’s 0.5 per cent) are very low indeed, making this an unusually good time to borrow if you think you’re going to be able to repay your debt – many readers will never be able to borrow this cheaply again. But the CML’s Market Commentary shows lending levels hardly any higher than during the recession:
To some extent this may reflect more caution from the banks, but for the most part it is a tremendous popular vote of no confidence in the future of the economy. It isn’t just businesses serving the public sector that are scared to expand and considering contraction, it’s anyone serving the household sector. Manufacturing is doing well, and business services and finance are showing some strengths: they may be able to pull us into recovery, but I wish that the economy’s strengths were more broadly based.