Confidence in economy falls - ABI

Consumer confidence in the economy took a knock in the last quarter of 2009, with one-in-three consumers expecting the economy to worsen in 2010 according to research published today by the Association of British Insurers.

Optimism over the economic prospects for 2010 fell significantly, as worries over job security increased, the ABI added.

The ABI’s Savings and Protection survey for the fourth quarter of 2009 questioned 2,500 adults on their views on the economy, and how it affected their attitudes to saving and protection. Key findings show that:

• Optimism over the outlook for 2010 has fallen. Nearly a third (31%) expect the economy to worsen in 2010, up from 22% in the third quarter. Only 39% were optimistic about the economy in 2010, down from 52% who felt the same in the previous quarter.
• Worries over job security have increased. 31% said that they were more concerned about their job security than they were three months ago, up from 27% in the previous quarter.
• Paying off debts is taking precedence over saving. 42% have started paying off their non-mortgage debt faster than before, up from 34% a year ago. Of those saving regularly, only 17% expect to be saving more in 2010, down from 24% who felt the same way in the previous quarter.
• Despite a reluctance to put money away, more people regard themselves as savers than spenders. 37% see themselves as savers; 31% as spenders. Less than 20% say that they would rather get into debt than go without.

Dr Rebecca Driver, the ABI’s director of research and chief economist, said: “Despite continued fiscal and monetary policy intervention, consumer perceptions of the economic prospects and their own job security in 2010 have deteriorated.

“Seven-in-ten people feel that they would cope badly financially if they lost their job, with four-in-ten admitting that they had not made adequate financial provisions to enable them to cope with a large, unexpected expense. This is not because people are spendthrift – the majority would prefer to go without than get into debt, and there has been an increase in the number of people expecting to pay off their non-mortgage debt at a faster rate than compared to a year ago.

“These findings highlight how important it is for any government to deliver policies that appeal to consumers’ increasing sense of financial responsibility, helping more people become financially independent by increasing saving as well as reducing debt.”