The 21st quarterly UK Financial Activity Survey, commissioned by JGFR from GfK NOP, shows improved savings, investment and borrowing activity in prospect compared to the very weak intentions found in last quarter’s survey resulting from the severe squeeze on household budgets in the second half of 2006.
Consumers continue to favour saving rather than borrowing and spending. Housing market indicators continue to be mixed - property purchase intentions remain firm although mortgage demand is still weak.
· More people (75%) expect to save, invest or borrow in the latest survey compared to December (70%), although the headline FAB Financial Activity Index, based on a 2-quarter moving average, fell to a second consecutive record low, slipping to 92.4, down from 93.2 in December. In March 2006 the headline index stood at 105.6. The average in the 5 years of the survey is 101.0
Of the three major sub-indices two fell and one rose
· The FAB Savings / Investment Index fell slightly to 98.7 compared to 99.1 last quarter and down from 109.1 a year ago. On an unadjusted comparison between surveys in December 2006 and March 2007, expected savings and investment activity picked up (to 67% from 64%), boosted by more people intending to save regularly.
· The FAB Borrowing Index fell to a fourth consecutive record low, down to 74.0 from 76.2 last quarter and compares to 101.7 a year ago. Among borrowing categories slight improvements in expected activity are found on a like-for-like basis between quarters in mortgages and car financing plans. Borrowing behaviour is far more constrained than in March 2006 suggesting the impact of the interest rate hikes since the summer.
· The FAB Debt Repayment Index rose very slightly to 84.4 from 84.1, well down on 109.2 a year ago. High levels of debt repayment were a feature during 2005 and the first half of 2006, with around a third of adults intending to pay off/pay down debt. This proportion has reduced to around a quarter of adults.
Rise in regular savings activity in prospect
· Most of the 18 categories of savings, investment and debt related FAB activity indices fell quarter-on-quarter with the biggest falls in the FAB Cash Deposit Index, down from 114.0 to 107.9, the FAB Credit Card Borrowing Index down from 75.7 to a new record low of 69.6 and a drop in investor buying sentiment – the FAB Equity Buying
Index falling to 128.2 from 136.2.
· Despite the sharp fall in share prices at the beginning of March fewer people intend to sell stocks and shares. The FAB Securities Selling Index fell to 94.1 from 106.4, the fifth consecutive quarter the index has declined.
· While both the FAB Cash and ISA indices both fell, a record proportion of people intend to save regularly – the FAB Regular Savings Index rising to 107.3 from 101.5 last quarter.
Housing market indicators stable
· The housing market indices point to a more stable housing market in the coming months.
· The FAB Property Purchase Index, which covers intending cash and mortgage homebuyers is unchanged at 98.8, both quarter-on-quarter and compared to a year ago.
· In contrast the FAB Mortgage Index is at its weakest-ever level (71.5), down from 72.0 last quarter and down from 90.8 a year ago.
Rising interest rates would appear to have weakened demand in recent quarters, although to date this has not been reflected in mortgage approval figures.
Barclays and Lloyds TSB neck and neck as main financial services provider
· In terms of financial providers, Barclays retained its No.1 position as the UK’s main financial service provider, by a neck from Lloyds TSB.
The Spring 2007 Financial Activity Bulletin will be published on April 16th.
For details of the Bulletin and the underlying survey please contact John Gilbert +44 (0) 208 944 7510 / 07740 027968
*The Financial Activity Index is based on a 2-quarter moving average. The base quarters are Q3/Q4 2002 = 100.
The latest Financial Activity Survey was undertaken by GfK NOP for JGFR between March 9th-19th 2007 among 2,033 adults representative of the UK population aged 16+.
© JGFR March 2007 http://www.jgfr.co.uk/
EARLYBIRD NEWS RELEASE March 30th 2007