Kate Hughes: Could a summer of jubilation be the ultimate financial confidence trick?

 

So, how are we all feeling? Still buoyed by simply being part of the land of pomp and pageantry? Or just happy another two days off work came around so quickly? Despite eurozone implosion fears and other minor irritations we all seem really quite upbeat.

Equities posted their biggest one-day gain in six months this week, catching up with the rest of Europe after a weekend in which jubilee revellers each spent £40 extra (Moneysupermarket.com), splashing out on a Victoria sponge and a bit of bunting, and throwing off the cautious saving mentality – at least temporarily.

And it's all far from over of course – what about the impending "Greatest Show On Earth" or the endorphin hit on offer from your much-anticipated annual break? Do I dare even whisper it, even a bit of summer sunshine here in Blighty?

So could the feel-good summer of 2012 give consumer confidence a boost despite wider economic gloom? And could that confidence have a real effect on the ground?

"There is some evidence that the jubilee might have a marked effect on consumer confidence," says Nick Moon, who is managing director of Social Research at GfK.

"There was certainly an unexpected pick-up during the royal wedding last year, when the consumer confidence index went up by 10 per cent. It lasted about three months and can't really be explained otherwise.

"This year, with the Olympics coming up and even the positive effect of good weather, we could see any upturn maintained for longer."

Crudely, if we're more confident we spend more, and because consumer spending drives about 60 per cent of the UK's GDP, this key measure of the health of a nation's economy typically picks up two or three months after the consumer confidence – in turn affecting stock markets, government policy, etc.

Plus inflation is down slightly, so the relentless squeeze on our pockets is, we're told, lessened, and interest rates are highly unlikely to shift from rock bottom for quite some time.

In fact, GfK's latest poll shows that we haven't been this least downbeat about the economy's coming 12 months since last June and consumer sentiment surrounding our finances specifically has improved.

Granted, we are technically in a double dip and in its last economic forecast, employers' body, the CBI, expected growth to be flat in the second quarter of 2012 due, in no small part, to the financial hit of the extra holiday. "However, there will be an improvement in the second half of the year, reflecting an improving global economy and an expected easing in inflationary pressures, plus a slight boost from the Olympics and a bounce back from the second quarter."

So the Queen being on the throne for 60 years could ultimately give the nation's pensions a shot in the arm and improves employment prospects among other things, right? Excellent.

But then what about the real world? Is it true that fears over eurozone instability aren't translating into consumer confidence figures because the man in the street doesn't understand the impact a collapse would have on these islands?

Ian Kernohan, economist for RLAM, says: "Setting aside the obvious downside risks from Europe, the UK economy certainly looks down, but far from out.

"However, none of this matters if the situation in the eurozone deteriorates to the point of disintegration. In the event of a euro break-up, the severe hit to nominal GDP growth would lead to significantly lower tax receipts and higher government spending, with little chance of meeting the Coalition's fiscal mandate on the structural current deficit or the supplementary target on debt.

"[But] the UK is viewed as a sovereign state, with its own central bank, issuing debt in its own currency and with no record of default. For many investors, this is still an attractive proposition in an uncertain world."

None of this positive sentiment is a surprise for independent think tank British Future, whose investigation into British sentiment, State of the Nation 2012, earlier this year found that "quiet hope in anxious times captures the British mood".

Apparently, "we are fully aware of the perils facing the British and European economies, but refuse to let that entirely dominate the year ahead. We are pessimistic about where the country is heading yet confident that the places we live in will be resilient and pull through.

"This stubborn optimism reminds us that, when we look back, whatever happens on the world stage may be trumped by the personal milestones of births and weddings, pride in educational or career achievements, memories and loss at funerals too," says British Future.

"We believe that this will be a year of shared hope too, as we anticipate great national celebrations that will resonate for a generation."

kate.hughes@fitforprint.co.uk

Independent Comment
blog comments powered by Disqus
Finacial products from our partners
News in pictures
World news in pictures
Property search
       

ES Rentals

    Independent Dating
    and  

    By clicking 'Search' you
    are agreeing to our
    Terms of Use.

    Day In a Page

    James Pembroke: The man who's eaten everywhere

    The man who's eaten everywhere

    Few people know more about restaurants than James Pembroke, who only spent five mealtimes at home during his entire childhood.
    A Berliner in 1963 – but did John F Kennedy once admire Adolf Hitler?

    A Berliner in 1963 – but did John F Kennedy once admire Adolf Hitler?

    The young JFK praised 'superior' Nordic races during visits to Germany
    Banned Iranian director Mohammad Rasoulof to attend Cannes Film Festival 2013, his first public appearance since prison

    Banned Iranian director to attend Cannes Film Festival

    Mohammad Rasoulof to make his first public appearance since being imprisoned three years ago
    Seeing the larger picture: Inspiring images of space

    Seeing the larger picture: Inspiring images of space

    An exhibition explores images how photography has shaped astronomy
    Eat Spam and carry on: Wartime pamphlets could teach us a thing or two about healthy, thrifty eating

    Eat Spam and carry on

    Wartime pamphlets could teach us a thing or two about healthy, thrifty eating
    Facial hair: Cat beards and the purrrsuit of excellence

    Facial hair

    Cat beards and the purrrsuit of excellence
    The 10 Best salt and pepper sets

    The 10 Best salt and pepper sets

    Whether they're for everyday use or to make your dining table look just right, it's worth getting a stylish shaker...
    Ferran Soriano: Predicting success if Manchester City 'vision' is followed

    Ferran Soriano: Predicting success if Manchester City 'vision' is followed

    Chief executive says trophies will come if a 'core' of suitable players is in place
    Thomas Müller: We couldn't handle losing a Champions League Final again

    Thomas Müller: We couldn't handle losing a Champions League Final again

    The Bayern Munich forward tells Tim Rich his side have to shed chokers' tag after two recent final defeats
    Giro d'Italia: The Stelvio Pass - cycling's killer climb

    The Stelvio Pass - cycling's killer climb

    As the Giro d'Italia tackles the brutal climb, Simon Usborne takes on the snow and switchbacks – and soon realises what the fuss is about
    National archives: Edward VIII’s phone calls - and how MI5 bugged them

    Edward VIII’s phone calls - and how MI5 bugged them

    Newly unearthed papers reveal a shocking extra dimension to the constitutional crisis over monarch’s abdication
    Sent down at the Old Bailey: A tour of the world's most famous court

    Sent down at the Old Bailey

    A tour of the world's most famous court
    Hollywood's random acts of red-carpet kindness

    Hollywood's random acts of red-carpet kindness

    The Hangover actor Zach Galifianakis’s date for his movie premieres isn’t arm candy  – it’s his 87-year-old friend who he saved from homelessness
    British football scores an own goal

    British football scores an own goal

    Many managers barely survive a year in post. Martin Baker talks to experts who make a case for clubs using forensic business skills to find the best staff
    James Lawton: Sergio Garcia cracks as major fault line opens up again

    James Lawton

    Sergio Garcia cracks as major fault line opens up again