Sunday 7 October 2012

Superficial consumer uptick, underlying concerns continue

Back in June, I noted that credit card lending had declined over the previous 12 months; now, according to the Bank of England, there has been a sharp recovery:

Similarly, the second-quarter report from ING Direct's Consumer Savings Monitor (PDF) shows a rise in consumer savings balances:

Yet the figures for UK M4 continue to decline:

So are these signs of recovering confidence? Perhaps the credit card figures reflect a temporary Jubilee Year / Olympics buildup feelgood splurge, and the plumping up of the savings cushion shows continuing underlying caution; otherwise, why not spend from savings rather than rack up plastic debt? And the M4 figures indicate a deflationary undertow beneath the surface.

But the aggregate statistics may be misleading. It could be that some who still have their heads above water, are saving hard while they can, and others are driven to buy on the card because they have no savings and cannot get more bank credit.

The next quarter may clarify the picture.

INVESTMENT DISCLOSURE: Mostly in cash (and index-linked National Savings Certificates), but now planning to build up some reserves of physical gold via regular saving.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content.

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