Remember that old chestnut about how it’s a recession when your neighbour loses his job and it’s a depression when YOU lose yours?
Well, research carried out by Datamonitor suggests a similar divergence between British consumer perception and behaviour during the current economic downturn.
The survey found that 90 percent of UK consumers believed that the country was in the grip of recession but slightly over half of them (53 percent) said their household finances have either improved or stayed the same. Similarly, twice as many people feel their job is safe as those who have actually lost or fear they will lose their jobs.
“In the majority of households there does not appear to have been any significant increase in financial strain that results in consumers displaying recessionary behavior,”
“On the contrary, only 8 percent globally think that their household’s general financial situation has worsened significantly since before the downturn, and thousands have actually benefitted from reduced mortgage repayments, for example.”
Datamonitor said the UK could be in the grip of a “psychological recession”, adding that the term was not meant to trivialise the economic contraction but to illustrate that the knee-jerk psychological reactions of consumers to the threat of recession were “primarily responsible for the perpetuation of the recession.”
Its solution is to…well, look on the bright side.
“The communication of positive messages through the government, the media and the banking industry is what is needed to facilitate a psychological shift and confidence boost amongst consumers, bringing about a ‘Psychological Recovery.”
(An earlier version of this post incorrectly said that Friends Provident had commissioned the Datamonitor survey)
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3 comments so far
Well, ever since I left university the start of the 1980’s recession, I’ve noticed that my peers (educated contrarians) have joked about “doing their bit” by going on a spending spree during a recession, so that’s nothing new.
But I think one needs to consider the statistics a little more carefully. The conventional explanation for the improvement in household incomes is that it consists of those households which were on tracker mortgages at the time when interest rates were being cut. When the improvement in your financial situation lay entirely in the hands of others, and so does its future, then you are probably less likely to feel comfortable about splurging….
- Posted by Ian KemmishThis recession? It’s all in the mind.
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Preceeding Boom? It was all in the mind.
- Posted by David MatherWell, I am a novice.
I guess this recession has helped us see some of the flaws in system and to regulate them strictly.
And the job is pretty much done. So we can move on, cautiously!
All I say is that any potential risk needs to be foreseen and covered for in future. We cannot allow another mortgage crisis or a credit card crisis, which is hinted to be another problem, to impact the economy.
- Posted by Nataraj