Workers and consumers face a depressing New Year
Two new indicators of how people feel about 2011 have been published. The Chartered Institute of Personnel and Development’s Employee Attitudes to Pay survey shows that just 58 per cent expect a pay rise next year, down from 67 per cent last year. The number expecting a freeze rose from 25 per cent to 33 per cent. Public sector employees are the most pessimistic – 49 per cent expect a freeze.
Most people think the outlook’s just as bad when it comes to spending it. The Nationwide’s headline on their Consumer Confidence Index is “Consumers show lack of festive cheer in November”. The Index fell for the third month in a row, to 45 – its lowest level since March 2009.
I’ve reported on a succession of these straws in the wind and they all point in much the same dismal direction. I expect consumers will be put off by the cuts that lie ahead and January’s VAT increase; and, as Chris Dillow says, inflation that is running ahead of pay and people’s desire to pay off debts will also have a depressing effect on consumer spending.
If manufacturing continues its strong recovery and the service sector matches it, we’ll eventually put these problems behind us. Consumers eventually respond to a healthy jobs market and rising real wages. But with the public sector in reverse and individuals so gloomy, businesses will not be able to rely on domestic demand. An awful lot depends on the strength of the global recovery.