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Improving U.K. Consumer Morale May Help Recovery: IHS Global Insight

Thursday, 23 February 2012 | 00:00
The recent upturn in British consumer confidence, as latest retail sales data and the household finance survey showed, is likely to help the economy return to the growth path, IHS Global Insight Chief European and U.K. economist Howard Archer said in a note.
The economist said that the marked improvement in February's Markit Household Finance index, and the 0.9 percent increase in retail sales in January signal that the squeeze on consumer spending has eased significantly for the second consecutive month as inflation slowed.
If households continue to spend at the current levels through the next few months, with inflation hopefully falling back further during that period, it would lessen the chances of a further GDP contraction, Archer observed.
The economist, however, warned that further rises in unemployment, ongoing muted wage growth and elevated debt levels may keep a cap on consumer spending for some time to come. Also, the below-50 reading of the household finance index indicates that consumers are still under serious pressure.
Data from a Markit Economics survey on Monday showed the U.K.'s household financial index improved to a 14-month high of 38.7 in February from 36.4 in January. The index, however, remained below the 50-mark that separates improvement from deterioration.
Source: RTT News
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