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Consumers financial confidence has remained steady over August, the latest figures have intimated.
According to the most recent Consumer Barometer from Lloyds TSB Corporate Markets, Britons could be becoming more optimistic that the Bank of Englands monetary policy committee (MPC) will not increase the base rate once more before the end of the year. Some 69 per cent of those surveyed believed that interest rates will be higher rather than lower within a years time – a figure down from the 74 per cent noted in July and the lowest noted for the last six months. In addition, the financial services firm suggested that the publics views about interest rates are likely to have been boosted after it was revealed that consumer price index inflation fell below the Banks target during July to 1.9 per cent.
Trevor Williams, chief economist for Lloyds TSB Corporate Markets, said: The recent financial market volatility, coupled with Julys encouraging inflation figures, has prompted economists to reign in their interest rate expectations and it seems like consumers have followed suit. For the first time in six months weve seen a positive sign in consumer opinion that interest rates may finally have reached their peak in the current cycle.
However, he suggested that consumers are yet to feel the true effect of the MPCs increases over the last 12 months on their ability to manage their personal finances. This change in sentiment, coupled with the boost from improved job security, suggests that the coming economic slowdown will be one that steers clear of recession, despite the fact that the full impact of the five interest rate rises so far has not yet been felt, Mr Williams commented.
Consequently, the confidence in interest rates, combined with the news of a rise in economic growth during the second quarter of 2007, was said to have helped increase the publics confidence in their employment security. The number of those respondents who are feeling more safe about their occupation was revealed to be the same as those who are currently feeling less secure, in comparison with the four per cent difference noted in June and July. Meanwhile, more than half of respondents felt that their job is currently just as secure as it was 12 months ago. However, the study also revealed a fall in job prospects. Currently 15 per cent believe that the British employment scenario will be better in the forthcoming year, compared to 36 per cent who think that it will worsen.
Additionally the findings revealed that worries exist over rising prices impacting upon consumers personal finances. Just under two-thirds (62 per cent) think that the value of goods has increased over the last 12 months. Meanwhile, 80 per cent believe that prices are set to be higher in a years time. In addition, Lloyds TSB also showed that the majority of Britons will believe that inflation will increase by between 2.5 and three per cent in 2008.
And with concerns about increasing prices, consumers could well be set to struggle more with managing their finances and so have to take out a bad credit loan. Earlier this month, a study from Datamonitor showed that the number of those unable to access traditional forms of borrowing is to rise 8.6 million by 2011 due to the effect of increasing utility bills and living costs, in addition to surging insolvency numbers.