Consumers predict over half a decade of austerity as the 'feelgood factor' fails to make a comeback

November 11, 2011

When asked when the”feelgood factor”will return to the economy, one in five British consumers (22%) think it will be between one and two years – and a massive 42% that it will take longer than two years. Just 2% consumers feel that the feelgood factor is already here, and only 4% believe that it will return within the next six months.

Toby Clark, , said:

“For a few months in spring, people seemed a little more upbeat. But this apparent spring bounce in confidence has faded. Consumers have drifted back into the pessimism that has characterised the national mood over the last year or so. Given the constant stream of bad news on subjects as diverse as the euro, unemployment and inflation, it would be more surprising if the positivity had lasted. ”

“Firms need to get used to this downbeat mood. Consumers themselves expect the tough times to last for years, not months, and the financial scars left as a result of the slowdown will take a long time to heal. If, as many consumers expect, the elusive feelgood factor won’t be returning for another couple of years, we will have seen more than half a decade of austerity. This can’t help but have a fundamental – and long-lived – impact on attitudes. “Toby continues.

Not everyone is struggling, of course. Currently, one in five (20%) consumers claim that they have not been affected by the slowdown – a figure that has remained relatively steady month on month – with 57% claiming to have felt ‘manageable’ effects and 23% saying it has had a major impact.

The most striking change in consumers’ mindsets in late spring was a fall in the proportion who said that they had been hard-hit by the slowdown. In May, it had fallen to just 20%. Again, though, the following months have shown that this was a blip rather than the start of a trend. By October 2011, the share of consumers who say that the slowdown has had a major impact on their finances was approaching a quarter.

People aren’t panicking. There has been no collapse in confidence, and the proportion who are either really struggling or are already in financial trouble remains steady at around a tenth of the population. But there’s little joy around. Just a fifth say that their finances are healthy enough to allow them to put money aside every month, or indulge in a few luxuries.

“Technically, the recession is long-gone. For consumers, though, technical definitions of recessions are largely irrelevant, and the proportion of people who say that the slowdown has had a major impact remains well above that seen during the recession itself. The economy has been in limbo for much of the year. We haven’t fallen back into recession, but growth has been lacklustre, at best. It’s unsurprising that consumers’ own financial situation is following a similar pattern. “Toby concludes.

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