Wednesday, May 16, 2007

Consumers braced for higher rates

Will consumers carry on shopping?
The vast majority of UK consumers are resigned to higher interest rates, a Lloyds TSB survey suggests.
Eight out of 10 consumers said they expected UK interest rates to be higher a year from now.

In addition, three quarters of consumers expect price inflation to rise over the next twelve months.

But despite the gloom over prices and rates, consumers felt more confident about keeping their job in April than they had done the previous month.

We're likely to see some slowdown in consumer spending but with job security remaining strong, the impact won't be drastic

Trevor Williams, Lloyds TSB

In total, 76% of consumers said they felt secure in their job.

Overall, the bank said consumers would take recent interest rate rises in their stride, because they had been widely anticipated rather than coming out of the blue.

Slowdown

UK interest rates have now risen four times since last summer, with some experts predicting further increases to come.

Consumers tightening their belts was likely, the bank said.

"With high price expectations and the recent rate rise we're likely to see some slowdown in consumer spending but with job security remaining strong, the impact won't be drastic," Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said.

Last week, the Nationwide Building Society said that consumer confidence was at its highest since October 2006.

Source: BBC.com

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