Like the spring weather there is a chill attached to the Q2 savings, investment and borrowing activity in prospect. Compared to the JGFR/GfK Q1 Financial Activity Barometer* last December, some 36 million consumers intend to save, invest, borrow or repay debt, one million fewer on the quarter, but similar to 12 months ago.
An estimated 25 million adults intend to be financially active **down by around 300,000 adults compared to Q1 and down by an estimated 1.2 million in March 2012.
The headline 2-quarter JGFR Financial Activity Index*** fell 3 points to 89.5 on the quarter but is up from 85.1 a year ago. All 3 other headline indices also picked up on the depressed levels of a year go, weighed down by very weak intentions in the Q1 2012 Barometer. The biggest jump is in the JGFR Debt Repayment Index, up 18 points to 86.0.
Cash savings intentions lower
Cash deposit intentions continue at their 10-year low with just a quarter of adults intending to place a cash deposit, well below the long term average of just over a third. The JGFR Cash Deposit Index fell to a survey low (78.9) and is below a year ago (94.1). A drop in savings households together with falling deposit rates will be main reasons for the decline. Improving stock markets in Q1 may have helped ISA intentions improve. 31% of adults intend to put money into an ISA, down slightly on a year ago and the long run average. The JGFR ISA Index gained points to 103.9 on the quarter but is down from 106.4 12 months ago.
Little change in life & pensions activity
The introduction of auto-enrolment into pension schemes and the Retail Distribution Review in January have to date had little impact on overall demand for life & pension products. Some 35% of adults intend to contribute to a life or pensions scheme, little changed on the past 5 quarters. Regular pension contributions are slightly higher, with a quarter of adults and 38% of workers intending paying into a pension scheme.
Investor sentiment slumps
Investment sentiment slumped despite the strong Q1 gains in stock markets with fewer younger and middle income investors. Both the number of intending buyers and sellers are below average. The JGFR Equity Buying Index shed 17 points to 84.5, although it is above the survey-low of March 2012 (75.9).
Consumer credit usage set to rise
One segment of growth is set to be consumer credit. More people intend to use unsecured credit in Q2, up from 9% to 11%. All consumer credit measures showed modest gains with the most improvement in overdrafts and credit cards. With very strong consumer credit growth last September falling away, the 2-quarter JGFR consumer credit indices have weakened in Q2 apart from overdraft borrowing.
Expected big ticket purchases of cars and property depressed in Q2
Big ticket purchase intentions on cars and houses weakened in Q2. Demand for car financing plans is very depressed with the 2-quarter JGFR Car Financing Plan Index at a survey low of 51.1 compared with 69.1 in March 2012. While efforts to boost the housing market are a key aspect of current economic policy, both property purchase intention and mortgage intentions have failed to build on the autumn pick-up. Fewer cash buyers in prospect , a feature of recent quarters, will be a factor in depressed property
purchase intentions, while economic uncertainty is likely to cause people to defer mortgage considerations.
The JGFR Property Purchase Intentions dropped 3 points to 65.5 on the quarter, but is up from 56.7 in March 2012, while the JGFR Mortgage Intentions Index shed 9 points to 46.9, the lowest since last June.
Go west for greater financial activity
Regional differences in financial activity have been a feature over the past decade. For the second successive quarter the biggest proportion of the financially active is in the South West, the region harbouring the highest proportions of intending savers and borrowers. A higher proportion of Londoners intend repaying / paying down debt and also putting down a deposit for property
Commented John Gilbert, Director of JGFR:
“Sadly there is little in the latest FAB to point to anything other than a period of weak activity and demand. Economic uncertainty and squeezed finances continue to lead to people deferring activity apart from repaying debt. One area where there does appear to be greater financial product activity is in mis-selling claims which is not good for the industry.”
John Gilbert 0208 944 7510 / 07740 027968
*The 43rd (Q1 2013) quarterly UK Financial Activity Barometer (FAB) was undertaken by GfK NOP between November 30 – December 9. 2,002 adults aged 16+, representative of the UK population, were interviewed by telephone. The Q2 2013 Barometer was undertaken by GfK between 1 – 10 March 2013 among 2,000 adults representative of the UK population by telephone. The FAB asks consumers about their intended savings, investment and borrowing intentions in the next 6 months across some 18 categories of activities. Charts are available of activities across the following markets: savings & investment, life & pensions, investment in equities and bonds, mortgages and property purchase, consumer credit, debt repayment and capital withdrawal.
**JGFR defines financially active adults as people undertaking 2 or more savings, investment, borrowing or debt repayment activities. Financially engaged people intend to undertake 1 activity
*** Consumers are asked about their intended activity across the next 2 quarters. To capture the longer time span and to partly offset seasonal shifts in demand we use a 2-quarter moving average to create an index using Q2/Q3 2002 =100