12/01/07

Reading through today's business section of the Guardian online newspaper, I was particularly drawn to a specific article which was located in the upper left-hand corner. It of course deals with the current credit crunch turmoil as well as rising petrol prices, and is also a topic we have been discussing in class. Because of the concern caused by the two factors named above, consumer confidence has been pushed to its lowest level since the invasion of Iraq in March 2003.


Title: Consumer confidence at four-year low
Date: 12/01/07
Source: The Guardian


The leading market research organization, GfK/NOP, released a survey yesterday morning which showed that consumer confidence fell for the third consecutive month in November. The five core measures that make up the monthly index also all showed a decline, falling to -10 in November from -8 the previous month, even though analysts only predicted a drop to -9. In addition to these findings, the major purchases measure, which records whether people feel the time is right for a large acquisition, fell to its lowest level since 1995. As a result, GfK/NOP warned that the drop in confidence could be bad news for retailers this Christmas.


The fall in confidence stems from people's pessimism about both their personal finances and the general financial situation over the last 12 months, and also in the year ahead. "With petrol prices racing past £1 a litre, food prices on the increase and the prospect of higher mortgages and loan fees on the horizon resulting from the credit crunch, even the most optimistic seem to view their glass as half empty," said Rachael Joy. To add to this, on Thursday the Bank of England governor Mervyn King warned MPs that the short-term outlook for the economy was "rather uncomfortable" and "highly uncertain."


For any UK citizen, regardless of their background or profession, this is bad news. As a result of everything being at their lowest levels, the economy is only going to suffer more than it already has. The credit crunch and rising petrol prices have done an incredible amount of damage already and, unfortunately, I don't see conditions improving anytime soon. In a rather recent article, King said that the long-term outlook for the economy is one of a return of growth to its average rate and the lowering of inflation back to its target. With his dire short-term outlook of uncomfortableness and uncertainty, however, it's rather hard to have any hope for the future. With the holiday season right around the corner and GfK/NOP's warnings, hopefully it will still be a Merry Christmas.