High spring tide of confidence this Easter

Driving into the South West felt like a new beginning. Spring is in the air. The sun was shining, new leaves were appearing on the trees and hedgerows, the flooded fields of the winter were now pristine green. On the car radio the airwaves were filled with sound-bites from Dawlish as the iconic rail-link was restored – the ‘Men in Orange’ being the nation’s new Games-makers.

With schools breaking up for Easter the South West may be a big beneficiary of the feel-good factor that is now reaching most parts of the UK. Last minute getaways to the sea seem very likely.

Indeed the confidence tide continues to lap higher. The March GfK measure of -5 is at the highest level since August 2007 and may move into positive territory in the coming months for the first time since March 2005.

UK Consumer confidence January 1997 – March 2014


Source: GfK NOP / European Commission / JGFR

Much of the unpopular heavy lifting work undertaken by the coalition government appears now to be bearing fruit; the public’s economic optimism is at its highest since June 2001 and it is such optimism along with a collapse in unemployment expectations and improved household finances that have led to the surge in confidence.

Such confidence is reflected in growing levels of economic activity. Both spending intentions and saving intentions are sharply higher in the GFK data. On the high street estate agents and car dealers are reporting demand and sales at pre-recession levels.

The Q2 JGFR/GfK UK Financial Activity Barometer (FAB) shows intended savings, investment and borrowing activity in the next 6 months at levels above the long term average and well ahead of a year ago. Many of the 18 individual category indices are at multi-year or survey record highs.

Housing market confidence capturing both mortgage and property purchase intentions is at its highest since mid-2008. Regular savings intentions are at their highest since the survey started in 2002 and are likely to reflect the need to save for a property deposit.

Pension reform announced in the Budget came too late to affect the strongest regular pension contributions in prospect since mid-2006 with overall life and pension intentions at the highest since autumn 2006.

Is everything in the garden in spring bloom?

Financial wellbeing, derived from consumers state of personal finances, net saving and spending confidence and a proxy for living standards, regained a zero level in March, a level last visited in February 2008. A year ago the measure stood at -72 and at the time seemed destined to spend much of the current decade struggling to regain a positive measure let alone move back above the levels pre-recession of +50.

Current trending points to a move back above the long term average (+7) in the next 2 months and to test the levels pre-recession towards the time of increasing political activity as the General election approaches.

But debt needs to be carefully watched.

Not all the public have shared in the recovery or financial wellbeing. The past 5 years have been a period of unprecedented low interest rates benefiting borrowers but not savers. Debt repayment for many has been a priority, while for a growing number of indebted households who have struggled to make ends meet, access to credit has been vital, with the emergence of payday lenders to fill the need.

Currently some 6% of households are indebted, an above average level, and an increase over the past 6 months from 4% in the previous 6 months. In the Q2 FAB both overdraft intentions and borrowing by credit card intentions are at 12-year survey highs with many borrowers already indebted.  As a result total consumer debt is expected to grow from the current £1.439 trillion.

With interest rates set to rise in the next year and both the Financial Conduct Authority and Bank of England now regulating mortgages and consumer credit more stringently, marketers will need to pay more attention to the financial situation of their customers and of those segments that have not seen much improvement in household finances in the past 5 years.

5 years on: Which segments are feeling better off?


Source: GfK NOP / JGFR

Women, the over 40s, low earners and people living in the North of England and Northern Ireland are the segments feeling less well off and more likely to be in struggling households.

While consumer spending this Easter is set to be buoyant, marketers need to be aware of the threat of future debt deflation when the current incoming high tide of confidence goes out.

John Gilbert is Chief Executive of JGFR and Chairman of charity Cricket for Change. Read more from him in our Library.