Over the past few years, Economist and Politicians have been talking about consumer confidence and that its importance in the recovery of the economy. So why it is important and what can we do to help get it back on track. The thing with consumer confidence is that it is always fluctuating, depending on what is going on at time in the economy and also to a certain extent global issues.
So what things can affect consumer confidence, the biggest drag can be the price of oil and interest rates. These two things can impact on how much you put in your car and also you’re mortgage, which in turn decides how much you have left and because these can fluctuate, people are always frightened to spend.
However they are other factors, inflation for example, but this is a longer measure in that if prices have increased people will not want to spend, but if it falls prices are cheaper and people will spend. However that is oversimplifying it.
The real issues with consumer confidence is how to get it back and that is a tricky thing to do, as in the current climate everybody is paying debt down and also people are cutting back on what they spend as I mention spare cash is going on debt. So what can we do both business and individuals?
The first thing individuals can do is shop around, as this can create spare cash especially if you change utility suppliers. Also get business to fight for your money, as consumers are the biggest stake holders.
Business also has a part to play to helping to get consumer confidence back, as consumer are there lifeblood. So what can they do, I say cutting prices is the key, even if it means sacrificing some profit. Banks also needs to lend more, but that is a subject on its own, but won’t solve the whole problem.
Some say the government needs to do more, which is tricky given that they need to bring the deficit down, while maintaining investors’ confidence. There are something’s they can do, first is to reintroduce the car scrappage scheme. The second is increase the personal tax allowance to £8500; this would make people earning £15000 a year, approximately £120 a year better off.
These measures could increase consumer confidence, but the key word is COULD as it is ultimately up to the individual to spend regardless of what the economy is like, or what business does and even the government. The consumer has got to feel that he wants to spend not that he needs to spend, only then will the consumer confidence go up and consumer spending will rise. I hope this article has given a brief insight into consumer confidence, as without consumer spending the effect on this would result in the service sector contracting even further, which would be damaging. So it is not an easy issue to look into, but hopefully I made it a bit easier to understand the different strands.
David Findlay was born in Wellingborough and has lived in Leicestershire for the past 11 years.
He currently works as a Payroll Administrator for a large retail company where he has also undertaken the role of “Community Champion” through which he encouraged local residents and schools to become engaged in enhancing their local community.