Consumer spending drop results in economists' warning

02/09/2008

The recent downturn in consumer spending has very gloomy implications for the economy, new analysis has shown.

Capital Economics pointed out today that money spent on goods and services represents around two thirds of all financial activity in the economy - with money spent in shops taking up around half this amount.

These comments throw the spotlight on the most recent data release on consumer spending from the British Retail Consortium, which showed a year-on-year fall of 0.9 per cent.

The data came against a background of falling house prices and increasing job losses.

Jonathan Loynes, chief European economist at Capital Economics said: "Consumer spending overall is very important; it's about two thirds of activity in the economy and retail sales are a bit less than half of that. So it is pretty important and it certainly is a pretty good barometer of overall conditions in the economy.

"Clearly it is affected by changes in unemployment, changes in interest rates, what's happening in the housing market and all of those things at the moment are clearly having a negative influence."

Tags; Current UK Economy, Young Family Finances, Credit Card Lifestyle, Recent Graduate Debt,

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