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British consumers to be better off this year: report by wgre ethbtn
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British consumers to be better off this year: report |
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Business,Business News,Business Opportunities
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Hard-pressed British consumers will see light at the end of thetunnel after five 'torrid' years, with wage growth expected tofinally begin to outpace inflation, a report on consumer spendingissued by an independent forecasting group said on Monday. The Ernst & Young Item Club report said changes to the personaltax system announced in the Budget and falling inflation willbolster the wallets of average earners by 482 pounds (757 U.S.dollars) this year and 624 pounds in 2013, which will feed throughto a steady pick-up in spending on Britain's high streets. Provided oil prices continue to ease, inflation is likely to moveback towards the 2-percent target by the end of the year, bringingprices in line with wages. "After the tightest squeeze on consumer incomes in a generation,the worst is now behind us and most people should start to feel abit better off by the end of the year," said Andrew Goodwin, senioreconomic advisor to the Ernst & Young ITEM Club. According to the report, stronger household finances and animproving economic outlook will result in a gradual improvement inconsumer spending from the middle of this year, whilst tourism fromthe Olympics will provide an additional boost.
Spending growth is forecast at 0.8 percent this year and 1.1percent in 2013, according to the report. However, ITEM Club warns that it will be a slow recovery for thehigh street. Spending will be constrained by consumers paying downdebt, and won't return to pre-recession levels until 2015. High-tech goods will win the biggest share of our wallets, said thereport.
Audio visual goods, such as televisions, mobile phones andbroadband, will continue to perform strongly. The recreation andculture and communications sectors will win the battle for thebiggest share of the wallets and will both grow by 4.2 percent thisyear. ITEM expects spending in sectors with greater income elasticity tostrengthen, such as cars, and hotels and restaurants, albeitslowly. Growth of the two sectors is forecast at 0.7 percent and0.3 percent respectively for this year and will rise to 2.6 percentand 1.1 percent by 2015.
Goodwin said downside risks dominate the forecast. "The eurozonecrisis continues to cast a long shadow and consumer confidencecould easily take another hit if the situation worsens,particularly if unemployment nudges up," he said. "We are optimistic, but conditions on the high street will remainfairly fragile until a more sustainable recovery takes hold," hesaid. (1 pound = 1.57 U.S.
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