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Consumers and The Economic Outlook - UK - February 2011

In this report, Mintel reveals the current state of consumers’ household finances, their expectations for 2011, and how their situation has changed over the last year or so. Their spending priorities are assessed, and the potential impact on the broader economy is considered. Mintel’s consumer research results are compared against macroeconomic data, in an attempt to discover how broader economic trends are affecting people’s personal finances.

  • Saving still tops people's priorities. Some 42% want to add to their emergency fund over the course of 2011, and the same proportion plan to save up for a big ticket purchase. The aftermath of the recession is still being felt, and people are looking for security.
  • Although it may cause difficulties in the short term, over the longer-term the shift in consumers' mentality can only be a positive. Consumers themselves expect to consolidate their finances by cutting outstanding borrowing.
  • Consumer confidence is extremely fragile. People are worried about their financial future.
  • There are strong signs that talk of the government's austerity measures is unsettling consumers. They expect taxes and unemployment to rise, and most believe that they will be at least slightly worse-off as a result of the fiscal tightening.
  • Even a year after the recession ended, more and more people are feeling the impact of the slowdown. The proportion of people said they had been unaffected steadily fell throughout 2010.
  • Incomes are being squeezed. With inflation outpacing wage growth, consumers are going to be hunting for value - spending priorities continue to be reassessed, and old loyalties will be questioned.

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Table of contents

  1. Issues in the Market

      • Abbreviations
      • Future Opportunities

        • A return to value?
          • Taking the slog out of saving
          • Market in Brief

            • Most are getting by OK – but the strain is starting to show
              • Figure 1: Household financial situation, December 2008-December 2010
            • The recession is over…
              • Figure 2: GDP quarterly percentage change, Q1 2004-Q4 2010
            • …but more and more people are feeling the after-effects…
              • Figure 3: Impact of the slowdown, December 2008-December 2010
            • …and confidence is ebbing away
              • Figure 4: Financial confidence, December 2008-December 2010
            • The income squeeze is putting pressure on budgets
              • Figure 5: RPI and average weekly earnings, 2005-10
            • Contrasting fortunes for those ‘at risk’, and those who are ‘rising above it all’
              • Figure 6: The slowdown segmentation, December 2010
            • People are looking to build their emergency savings
              • Figure 7: Financial priorities, December 2010
            • Bleak macroeconomic expectations for 2011
              • Figure 8: Macroeconomic expectations for the coming year, December 2010
              • Figure 9: Personal financial expectations for the coming year, December 2010
            • Government cuts – chance of a rebound in confidence?
              • Figure 10: Impact of government austerity measures, November 2010
          • Key Issues

            • Are consumers feeling the benefit of the recovery?
              • Do people fear the impact of spending cuts and tax increases?
                • What are the spending priorities for 2011?
                  • How do consumer attitudes match up with macro-economic data?
                  • Macroeconomic Conditions

                    • Key points
                      • A shock fall in GDP…
                        • Figure 11: GDP quarterly percentage change, Q1 2004-Q4 2010
                      • …and incomes are being squeezed
                        • Figure 12: RPI and average weekly earnings, 2005-10
                      • Unemployment stabilises at just under 8%
                        • Figure 13: UK unemployment rate, seasonally adjusted, Jan 2005-Sept 10
                      • House prices no longer defying economic gravity
                        • Figure 14: Quarterly change in the Halifax house price index, 2005-10
                      • The implications of a becalmed property market
                        • Austerity measures will hit consumers
                        • Consumers, Spending and Saving

                          • Key points
                            • The credit economy
                                • Figure 15: Quarterly changes in the savings ratio and GDP, 1970-2010
                              • Consumers keeping their credit cards in their wallets
                                  • Figure 16: Gross and net consumer credit, seasonally adjusted, March 2000-March 10
                                • The cost of borrowing
                                    • Figure 17: Average quoted household consumer credit rates, Jan 2005-Oct 10
                                  • Mortgage lending still in the doldrums…
                                      • Figure 18: Gross and net secured lending, seasonally adjusted, March 2000-March10
                                    • …even though costs have come down
                                        • Figure 19: Average quoted household mortgage rates, Jan 2005-Oct 10
                                      • Write-offs rise, but remain manageable
                                          • Figure 20: Write-offs of loans made to individuals, March 2005-Sept10
                                      • Consumer Sentiment

                                        • Key points
                                          • Confidence and the economy – moving in opposite directions?
                                              • Figure 21: GfK NOP Consumer Confidence Index, January 2005-January 2011
                                            • Expectations trump reality
                                            • Household Financial Situation

                                              • Key points
                                                • Despite the slowdown, most are getting by
                                                  • Figure 22: Household financial situation, December 2010
                                                • Is the real recession still on?
                                                  • Figure 23: Household financial situation, December 2008-December 2010
                                                • Whose finances are healthy?
                                                  • And whose already struggling?
                                                  • Impact of the Slowdown

                                                    • Key points
                                                      • Only a fifth have totally sidestepped the slowdown
                                                        • Figure 24: Impact of the slowdown, December 2010
                                                      • The disconnect between GDP and personal experience
                                                        • Figure 25: Impact of the slowdown, December 2008-December 2010
                                                      • Had people only been ‘playing’ at recession?
                                                        • And is the real consumer recession yet to come?
                                                          • Who has been hardest hit?
                                                            • And who has avoided the worst effects of the slowdown?
                                                            • Financial Confidence

                                                              • Key points
                                                                • A fifth are really worried about their future finances
                                                                  • Figure 26: Financial confidence, December 2010
                                                                • Further signs of faltering consumer confidence
                                                                  • Figure 27: Financial confidence, December 2008-December 2010
                                                                • The impact of uncertainty
                                                                  • Who is confident about their future?
                                                                    • And who fears the worst?
                                                                    • The Slowdown Segmentation

                                                                      • Key points
                                                                        • Rising above it all? Or at risk?
                                                                          • Figure 28: The slowdown segmentation, December 2010
                                                                        • The Squeezed Middle
                                                                          • Rising Above it All
                                                                            • At Risk
                                                                              • Figure 29: Financial wellbeing, by the slowdown segmentation, December 2010
                                                                            • The Squeezed Middle – middle-aged...
                                                                              • ...and middle earners
                                                                                • Figure 30: The slowdown segmentation, by key demographics, December 2010
                                                                            • Macroeconomic Expectations

                                                                              • Key points
                                                                                • People are expecting a grim 2011
                                                                                  • Figure 31: Macroeconomic expectations for the coming year, December 2010
                                                                                • The bleak worldview of those ‘at risk’...
                                                                                  • Figure 32: Macroeconomic expectations for the coming year, by the slowdown segmentation, December 2010
                                                                                • ...and its impact on financial confidence
                                                                                  • Figure 33: Macroeconomic expectations for the coming year, by financial confidence, December 2010
                                                                                • Retirees fear tax rises: the middle age groups fear unemployment
                                                                                • Personal Financial Expectations

                                                                                  • Key points
                                                                                    • Consolidating household finances – but not necessarily saving
                                                                                      • Figure 34: Personal financial expectations for the coming year, December 2010
                                                                                    • Rising Above it All – and looking to stay that way
                                                                                      • Figure 35: Personal financial expectations for the coming year, by the slowdown segmentation, December 2010
                                                                                    • For better or worse, few expect a turnaround in their financial situation
                                                                                      • Figure 36: Personal financial expectations for the coming year, by most popular change in financial situation over the last year, December 2010
                                                                                    • Turning to credit to make ends meet
                                                                                      • Figure 37: Personal financial expectations for the coming year, by household financial situation, December 2010
                                                                                  • Post-recession Finances

                                                                                    • Key points
                                                                                      • Two fifths are worse off since the recession ended
                                                                                        • Figure 38: Change in financial situation over the last year, December 2010
                                                                                      • A further squeeze on the majority’s finances
                                                                                        • Figure 39: Change in financial situation over the last year, by the slowdown segmentation, December 2010
                                                                                      • Few demographics have escaped unscathed
                                                                                      • Impact of Government Cutbacks

                                                                                        • Key points
                                                                                          • Three quarters expect to be hit by the fiscal squeeze
                                                                                            • Figure 40: Impact of government austerity measures, November 2010
                                                                                          • We’re all in this together?
                                                                                            • Rising Above it All group expect to sidestep the worst of the cuts
                                                                                              • Figure 41: Impact of spending cuts and tax increases, by the slowdown segmentation, December 2010
                                                                                            • How much is the fear of the cuts contributing to financial uncertainty?
                                                                                              • And does this give grounds for optimism?
                                                                                                • Figure 42: Impact of spending cuts and tax increases, by financial confidence, December 2010
                                                                                            • Financial Priorities

                                                                                              • Key points
                                                                                                • Savings top the list of financial priorities
                                                                                                  • Figure 43: Financial priorities, December 2010
                                                                                                • Time for a bit of luxury?
                                                                                                  • Figure 44: Financial priorities, by the slowdown segmentation, December 2010
                                                                                                • Those in greatest danger are the least able to prepare
                                                                                                  • Figure 45: Financial priorities, by financial confidence, December 2010
                                                                                                • How did 2009’s intentions match up to reality?
                                                                                                  • Figure 46: Financial priorities over the previous year and coming year, November 2009
                                                                                              • Discretionary Spending

                                                                                                • Key points
                                                                                                  • ‘Treating yourself’ is still top of the spending priorities
                                                                                                      • Figure 47: Discretionary spending, December 2010
                                                                                                    • Capitalising on improving finances
                                                                                                      • Figure 48: Discretionary spending, by most popular change in financial situation over the last year, December 2010
                                                                                                    • Come dine with us?
                                                                                                      • When do essentials become luxuries, and luxuries become essentials?
                                                                                                        • Figure 49: Discretionary spending, by household financial situation, December 2010
                                                                                                      • How important a motivator is financial insecurity?
                                                                                                        • Figure 50: Discretionary spending, by impact of the slowdown, December 2010
                                                                                                    • Factors Affecting Household Finances

                                                                                                      • Key points
                                                                                                        • The slowdown gives – and the slowdown takes away
                                                                                                          • Figure 51: Financial events and concerns, December 2010
                                                                                                        • The varying impact of the slowdown
                                                                                                          • Figure 52: Financial events and concerns, by household financial situation, December 2010
                                                                                                        • Employment and financial confidence
                                                                                                          • Figure 53: Financial events and concerns, by financial confidence, December 2010
                                                                                                      • Appendix – Household Financial Situation

                                                                                                          • Figure 54: Household financial situation, by demographics, December 2010
                                                                                                      • Appendix – Impact of the Slowdown

                                                                                                          • Figure 55: Impact of the slowdown, by demographics, December 2010
                                                                                                      • Appendix – Financial Confidence

                                                                                                          • Figure 56: Financial confidence, by demographics, December 2010
                                                                                                      • Appendix – The Slowdown Segmentation

                                                                                                          • Figure 57: The slowdown segmentation, by demographics, December 2010
                                                                                                      • Appendix – Macroeconomic and Household Financial Expectations

                                                                                                          • Figure 58: Financial expectations for the coming year, by most popular change in financial situation over the last year, December 2010
                                                                                                          • Figure 59: Financial expectations for the coming year, by next most popular change in financial situation over the last year, December 2010
                                                                                                          • Figure 60: Financial expectations for the coming year, by household financial situation, December 2010
                                                                                                          • Figure 61: Financial expectations for the coming year, by impact of the slowdown, December 2010
                                                                                                          • Figure 62: Financial expectations ‘lower’ for the coming year, by demographics, December 2010
                                                                                                          • Figure 63: Financial expectations ‘lower’ for the coming year, by demographics, December 2010
                                                                                                          • Figure 64: Financial expectations ‘about the same’ for the coming year, by demographics, December 2010
                                                                                                          • Figure 65: Financial expectations ‘about the same’ for the coming year, by demographics, December 2010
                                                                                                          • Figure 66: Financial expectations ‘higher’ for the coming year, by demographics, December 2010
                                                                                                          • Figure 67: Financial expectations ‘higher’ for the coming year, by demographics, December 2010
                                                                                                      • Appendix – Post-Recession Finances

                                                                                                          • Figure 68: Most popular change in financial situation over the last year, by demographics, December 2010
                                                                                                          • Figure 69: Next most popular change in financial situation over the last year, by demographics, December 2010
                                                                                                      • Appendix – Impact of Government Cutbacks

                                                                                                          • Figure 70: Impact of spending cuts and tax increases, by demographics, December 2010
                                                                                                      • Appendix – Financial Priorities

                                                                                                          • Figure 71: Financial priorities, by most popular change in financial situation over the last year, December 2010
                                                                                                          • Figure 72: Financial priorities, by household financial situation, December 2010
                                                                                                          • Figure 73: Financial priorities, by impact of the slowdown, December 2010
                                                                                                          • Figure 74: Financial priorities, by financial confidence, December 2010
                                                                                                          • Figure 75: Financial priorities over the last year, by demographics, December 2010
                                                                                                          • Figure 76: Financial priorities over the coming year, by demographics, December 2010
                                                                                                      • Appendix – Factors Affecting Household Finances

                                                                                                          • Figure 77: Most popular financial events and concerns, by demographics, December 2010
                                                                                                          • Figure 78: Next most popular financial events and concerns, by demographics, December 2010.

                                                                                                      Companies Covered

                                                                                                      • Bank of England
                                                                                                      • Council of Mortgage Lenders
                                                                                                      • Lloyds Banking Group
                                                                                                      • Nationwide Building Society
                                                                                                      • Northern Rock plc

                                                                                                      Consumers and The Economic Outlook - UK - February 2011

                                                                                                      £1,995.00 (Excl.Tax)