Consumer spending and confidence
After a long period of high consumer spending and confidence, both fell to record lows following the beginning of the economic downturn. High levels of personal debt and rising unemployment mean consumers are feeling the squeeze. Although consumers are still pessimistic and it is likely that confidence will remain fragile for some time to come, confidence has been rising since April 2009. However, consumerism is well embedded in British society and spending has also begun to pick up.
What are the implications?
- In an attempt to stimulate the economy, revive consumer spending and confidence and assist mortgage holders (see housing market), the BoE has cut interest rates to their lowest level ever.
- Pressure on all sectors to cut prices as empowered consumers seek discounts.
- A long deep recession and rising numbers of insolvent companies if levels of consumer spending do not pick up suffiently.
- Tightened consumer spending may impact on levels of individual giving, although evidence from previous recessions is that giving does not fall as much as may be expected..
- High cost ethical products and services risk being the first thing consumers cut back on as they tighten spending and cost overrides other concerns. Other luxuries may also suffer such as membership subscriptions, as well as social enterprise activity, particularly where it is consumer oriented.
Moving forward
An economic slowdown is impacting on many consumer choices.
- Do you understand which of your products and services (including memberships, events etc) might be perceived as luxuries by your stakeholders?
Which products and services stakeholders are willing to pay for is changing.
- Does your organisation need to rethink pricing structures and which services could be offered free and which charged for? This may be challenging as it requires rethinking finance and income generation models.
As all income streams come under pressure, there will be more competition for (potentially fewer) charitable donations.
- Are there tactics that your organisation can use to make your income streams more resilient (for example by converting donors to regular, planned giving using monthly direct debits)?
Consumers and supporters are looking to cut their spending and save money.
- Can your organisation explore opportunities for more in-kind support, such as new streams of volunteers as parts of the workforce need to change careers or gain new skills?
Want to know more?
Published by: The Guardian – a left-of-centre broadsheet
Date: June 2008
Format: Web
What is it?
This is a “Comment is Free” discussion piece suggesting that the economic downturn may have a positive impact on environmental issues.
How useful is this?
This article is useful in giving an alternative perspective on a popular topic. In particular, is explores how challenges such as rising energy and food prices will raise the profile of sustainable development. The public responses to the article give an impression of broader views on the subject, but are of variable quality.
GfK NOP Consumer Confidence Barometer
Published by: GfK NOP – an international market research company
Date: Monthly
Format: Web
What is it?
The latest press release referencing the most recent data. The index itself is a measure of consumer confidence, based on monthly survey data. It is based on actual and predicted changes in individual finances and in the general economy. A brief commentary is also given on the website.
How useful is this?
This is a respected and well-known index, giving a useful measure of overall confidence. However, it omits demographic nuances in confidence, but as a measure of overall consumer confidence, it is worth monitoring. Although headline results are given in press releases, details of results require a subscription.
British Retail Consortium: Retail Stats and Info
Published by: British Retail Consortium – a Membership organisation for retailers
Date: Monthly
Format: Web
What is it?
This provides data on key areas of consumer spending, including: clothing and footwear; food and drink; electrical; and DIY and hardware. It also gives data on consumer demographics and consumer satisfaction.
How useful is this?
The BRC is a membership organisation for retailers and the data and other services provided reflect those interests. Nevertheless, this is a good starting point for anyone looking to explore trends in consumer spending.
Nationwide Consumer Confidence Index
Published by: Nationwide – a Building Society
Date: Monthly
Format: PDF
What is it?
Data on a broad range of indicators of consumer confidence. It includes data on the current and expected state of employment, the economy and spending, as well as other relevant indicators.
How useful is this?
The commentary is limited but this provides a useful comparison to the Consumer Confidence Barometer. The website also provides a data archive as well as details on the methodology.
Recent comments
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.
Rene
This is the fact that hard to accept. However, Barack Obama is trying to get a plan in motion to get you some extra cash on payday so you won’t need a payday loan. He’s putting forth a tax cut and the Make Work Pay credit, as he calls it. The current administration’s efforts to get the economy back on track haven’t been helping so far, and he wants to get right into the middle of it to get things back on track. As with anything, the future isn’t clear, and impossible to tell exactly – but since the mortgage and credit crunch have arrived, things have been getting worse and the need for a payday loan has increased. Obama is hoping that bigger checks on payday will restore consumer confidence so you won’t need to take out a payday loan.
Kathryn
Third Sector ForesightThe Dawn of a New Age?
According to recent research from TrendsSpotting when we emerge, blinking, from the recession we will have become a whole new type of consumer. Their findings evidence the consumer behaviour you might expect in a downturn. What I find particularly interesting is their thesis that this behaviour will become embedded and we will continue to act like that, even if and when the economy recovers. The sceptic in me suspects it actually won't be long before the lessons apparently learnt in the recession will be dimmed by the passing of time.
It should be remembered that TrendsSpotting surveys the American market. Will their findings carry over into the English or European ones? It's often said that where America leads, we follow...
Key points from TrendsSpotting report:
Food and drink
Media and communications
Education
...with thanks to the TrendsSpotting research.
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