The evidence that the “animal spirits” — Keynes’s term to describe consumer confidence — are collapsing is coming thick and fast. The latest publication of GfK’s consumer confidence index provides scary reading for George Osborne. Consumer confidence in January has dropped 8 points this month to -29, the lowest figure since March 2009, when it was -30.
January saw decreases across all five measures — the most notable being in the “major purchase” index, which dropped a scary 21 points. These series are good predictors of what is going to happen to consumer spending.
Nick Moon of GfK NOP Social Research, comments:
January’s 8-point drop represents an astonishing collapse in consumer confidence. In the 35 years since the Index began, confidence has only slumped this much in a single month on six occasions, the last being November to December 1994 . . .
Today’s figures, when combined with the bleak economic forecast, will make talk of a double dip recession unavoidable.
The Guardian reported that Downing Street insisted that the slump did not mark a long-term drop in what they argued is overall robust consumer confidence. Robust it surely isn’t. Up is down, down is up.
It is not surprising, then, that Osborne is considering his first U-turn on the 1p rise in fuel duty, due to be introduced in April — overruling Danny Alexander, who had ruled it out a few days ago despite Cameron’s pleading. Asked on radio yesterday what he could do, Osborne said: “We can override it, we are looking at that.” I bet he is. I suspect there will be a gaggle of U-turns to come.