Debt management: Consumers choose to 'balance debt before spending'

03/02/2010

Consumers are choosing to pay off debt and refrain from making purchases, according to Nationwide.

The building society's survey of consumer confidence found that, at a time of the year when spending is usually high consumers are avoiding the high street and instead choosing to manage their debt.

Figures in the confidence index did suggest a small rise in spending in January with an increase of three points compared to the previous month.

But the Nationwide emphasised that willingness to spend remained low when compared to this "time of year historically".

The survey indicated that the removal of government stimulus measures, such as the lower VAT rate, may be partly to blame for the drop in consumer confidence.

Martin Gahbauer, Nationwide's chief economist, commented: "Heavy discounting on the high street and government driven incentives such as lower VAT, the car scrappage scheme and the stamp duty holiday combined to keep the Spending Index buoyant throughout much of 2009.

"The removal of these initiatives may now be causing consumers to reconsider parting with their cash at a time of year when we would normally expect to see high levels of spending confidence."

The Consumer Confidence Index stood at 73 points for January 2010.

Director of EuroDebt Kevin Still commented: "With the Bank of England reporting a rise in credit card spending in December, this can be partially attributed to Christmas and the New Year, but there is an underlying concern that those people with limited disposable income are having to use credit cards as a necessity. That is the time to seek debt advice.

"Many credit card issuers are now sharing information on account usage and this may make getting credit harder if you are over-committed and routinely exceed credit limits or withdraw cash on your card."

Posted by Jim Mead

Tags; Budgeting Advice,

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