Kate Hughes: Could a summer of jubilation be the ultimate financial confidence trick?
Saturday 09 June 2012
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."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Vogue under fire for 'Big Booty' article
- 5 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony