Consumer spending and confidence
After a long period of high consumer spending and confidence, both spending and confidence are now falling and only expected to grow 1% in 2008, compared to 3% last year.[1] This is partly due to the recent global economic slowdown – the ‘credit crunch’ and rising food and energy prices which means consumers are feeling the squeeze. Interest rates remain fairly high; recent cuts have done little to restore customer or business confidence and any further cuts are likely to be gradual. The end of many fixed term mortgages in this climate means that many people are suffering from higher mortgage deals (see housing market). Despite forecasts of dampened consumer spending, employment is still high and consumerism is well embedded in British society and will continue to play an influential role in many aspects of society as one of the key factors driving people's attitudes and behaviours.
What are the implications?
- Further cuts to interest rates in an attempt to stimulate consumer spending.
- Increased levels of personal debt.
- Tightened consumer spending may impact on levels of individual giving.
- Growing poverty and inequality as those with lower incomes are more likely to get into debt.
- Growth in empowered consumers who are more demanding in what they want and less willing to accept the advice of ‘experts’.
[1] Item Club Economic Forecast - Ernst and Young http://www.ey.com/global/content.nsf/UK/Economic_Outlook
Moving forward
This driver does not have direct implications for VCOs but it will impact on the other drivers listed below as well as many others. (There is often a relationship or interdependency between different drivers, which may be important to your organisation. As you scan each driver, it is important to think about its relationship or influence on others; if drivers are linked, then you need to think laterally to draw in all those that may be relevant.)
However, here are some questions for your organisation to consider:
Increased consumer spending could lead to an increase in debt . Organisations that work with homeless people, those in poverty or debt may find there is greater demand for their services. How could an understanding of changing need help you to develop more effective services in the future? You could think about this in two ways:
- Opportunities to improve: Should you need to change how you work or be more responsive?
- Opportunities to innovate: Should you serve new or different users?
Want to know more?
Nationwide Consumer Confidence Index
Published by: Nationwide
Date: Monthly
Format: PDF
What is it? A briefing on consumer confidence, updated monthly.
How useful is this? Short and easy to read, with headline impliations, useful graphs and background statistics.
[1]Time for some quiet reflection says ITEM, 2007, http://www.ey.com/global/content.nsf/UK/Media_-_07_07_23_DC_-_ITEM_Club_Summer_07_07_forecast
Recent discussion
How will this affect your organisation? Have you considered it during your strategic planning? Can you share any interesting relevant links?Join the discussion!
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Megan
Third Sector ForesightAccording to a recent populus poll for the times only a third of people expect to be able to maintain their existing lifestyle comfortably in 2008, so it looks like belts are tightening…
Megan
Third Sector ForesightFurther to my comment above, today an ICM poll for the Guardian painted a slightly different picture, with 51% ‘not confident’ about ‘the economy, your financial situation, and ability to keep up with the cost of living’. The slightly different stats are most likely due to the different wording of the questions, and shows the limitations of polls, but either way confidence does appear to be falling. An interesting aspect of the Guardian poll is the difference in confidence between ‘the poorest’ (33% are confident) and those ‘at the top’ (64% are confident) – a gap which widened since a similar poll in December and which the Guardian take as evidence of a widening gap between rich and poor.