Finding s from the 45th quarterly UK Financial Activity Barometer* show that consumers are continuing in the cautious mood of the past quarter and little changed on the weak demand of a year ago.
69% of adults intend to save, invest, borrow or repay debt, unchanged on March and a year ago. Fewer people intend to borrow (11%) than last quarter (14%) or a year ago (12%), with slightly more people intending to repay debt (25%), than in March (24%) and far more than a year ago (18%). There is no change in the proportion intending to save/invest (58%), down from 60% in Q3 2012.
The Q3 2013 JGFR Financial Activity Barometer shed 3 points to 87.8 on the quarter, and is little changed on a year ago. Of the underlying indices the most striking note is the jump in the Debt Repayment Index and weakness of Borrowing Index as consumers continue to prioritise debt reduction.
The JGFR Savings & Investment Index has weakened over the past year. Fewer people intend to place a cash deposit or put money into an ISA in the next 6 months than a year ago. 26% of adults expect to place a cash deposit, little changed on March and down from 30% a year ago.
The proportion of people intending to put money into an ISA also dropped, down to 29% from 31% in March and down from 35% two years ago. Poor returns on cash deposits together with the financial squeeze on households are likely factors in the decline in their popularity.
Investor sentiment is slightly higher. 14% of adults intend to invest in equities or bonds, up from 12% in March and a year ago. More adults are turning to bonds rather than equities. The headline JGFR Equity Buying Intentions Index fell 2 points to 83.7, slightly above a year ago but well below last autumn’s 104.5.
Despite the introduction of auto-enrolment and the need for long-term pension savings there is a big fall in regular pension contributions in prospect. 1 in 5 adults intend to make regular pension contributions, down from 1 in 4 in March and in June 2012 and well below the long-term average.
Fewer people intend making a life / pension scheme contribution in the coming months, down to 32% from 36% in March and well below the average of 39%. There is little change in lump sum contributions (8%) or regular life insurance scheme (18%) contribution intentions.
Weak demand for big-ticket spending
Despite the headline gain in confidence and government-induced measures to stimulate lending, the public is in a cautious mood.
Mortgage intentions and property purchase intentions remain well below long term averages. The overall JGFR Housing Market index combining both measures is 1 point higher on the quarter at 54.5 (10 points up on June 2012) but well below its long run average of 80.8.
Prospects for a UK-wide housing market bounce look unlikely, London and the South East apart, especially if mortgage rates edge higher.
One puzzle in recent quarters is very strong car sales but weak demand for car financing plans. The latest CFP intentions are close to recent survey lows pointing to a sharp decline in car sales, in contrast to industry expectations of strong H2 sales.
Demand for personal loans, credit cards and overdrafts all fell, with the JGFR Consumer Credit Index sliding 3 points to 62.7 compared to March, but is up from 54.8 a year ago.
Commented John Gilbert, Chief Executive of JGFR:
“Despite an 8-point jump in consumer confidence compared with a year ago, confidence in financial services products continues to be weak. Government / Bank of England efforts to boost lending appear to be having little impact outside of London and the South East and with a negative impact on savings activity. For many consumers repaying debt is their top financial priority”
*The Financial Activity Barometer asks consumers about their intending savings, investment, borrowing and debt repayment intentions in the next 6 months across some 18 categories of activity. The Q3 2013 survey was carried out among 2,007 adults representative of the UK population between 31 May and 15 June. The FAB is housed on the same GfK omnibus as used for UK consumer confidence enabling cross-analysis between the surveys
A separate UK Banking Barometer also uses the same survey omnibus and asks consumers who they regard as their main financial services provider
The latest FAB can also be linked to UK wealth. In the latest survey consumers were asked about their estimate of wealth covering savings and investments and any pension pot they have control over but excluding the value of their main residence
The Financial Activity Bulletin analyses the survey findings and will be published on July 15th. For details of the FAB and our tracking studies going back over the past decade please contact John Gilbert (+44 (0) 208 944 7510 / +44 (0) 7740 027968