If you believe the media coverage of the latest consumer confidence surveys, household spending is set to collapse under the weight of the cost of living crisis, dragging the UK economy into a deep recession. But how reliable are these signals?
As always, it is worth digging past the headlines. The GfK measure of consumer confidence did indeed fall to a record low in May. But people were less pessimistic about their own finances than they were about the economy as a whole.
This distinction is crucial. It is no surprise that people are worried about the general economic situation: we are constantly being told that the country is going down the plughole. But when it comes to people’s own finances, things do not look quite as bad.
What’s more, the forward-looking aspects of the surveys are generally holding up better than the backward-looking ones. People’s views of their personal finances over the next 12 months actually improved in May, albeit by just one point.
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