Can confidence really turn an economy round?

24th November 2010

Certainly great store is put on consumer confidence indicators. There was cheer when the latest round of Nationwide statistics (opens in PDF format) showed consumer confidence holding up in the UK. 

European confidence indicators are seen as a sign that the region may not be on the brink of collapse after all, as reported here in Business Week.

Indeed, one of the biggest worries about public sector job cuts is not their actual impact on employment, but their impact on consumer confidence.

There is a danger that just the perceived threat of redundancy will stop people spending even if it doesn't actually translate into actual job losses.

VAT rises also threaten to dent consumer confidence and spending, as this study from PWC demonstrates.

The accountancy group predicts a relatively modest net negative impact on consumer spending and GDP growth in 2011 from the rise. It believes a further 38,000 will lose their jobs as a result but these negative effects should be eliminated gradually.

The wealth effect

Leave a Reply

Your email address will not be published. Required fields are marked *