Consumer spending continues to rise
The Alliance Trust’s Financial Reality Index, which studies economic activity, household budgets, and net wealth, showed an improvement in the second quarter of 2007. The index rose from 73.7 to 82, however, it still remains under the dangerous level of 100, where it has declined for 3 years.
According to the report, there is now a critical difference between the benign conditions that make up the Economic Background and the far less healthy state of affairs in Household Budgets.
Everything looks well on the Economic Backdrop’s graph – the lines are heading upwards due to a strengthening economy, which is helping to maintain jobs.
Furthermore, increasing property prices have contributed to the Net Wealth index. In spite of increasing interest rates having an effect on household budgets, this was offset by an overall rise in equity. As a result, the Net Wealth index moved back over the 100 mark for the first time since the start of 2006.
The report also highlights that the main financial pressures seem to stem from rising mortgage repayments. Council tax charges are also on the increase and lower real earnings growth are also responsible for increasing financial pressure. The pressure from mortgage payments and other household bills are not in line with increases in earnings.
Some relief came from a slowing in inflation from record highs, although inflation has yet to fall back in line with the Monetary Policy Committee’s 2% target. However, the slowing of inflation contributed to a slight improvement in real disposable incomes.
Finally, the report observes that consumer spending has risen over the last year, indicating that households will be faced with higher levels of debt if they do not control their spending in the short-term.
Visited 2046 times, 1 so far today
Comments (0)
Trackback URL | Comments RSS Feed
There are no comments yet. Why not be the first to speak your mind.