Despite showing a cracking improvement in net trade, this week's GDP release didn't give much cause for comfort. At best, the economy stagnated over the last six months. This was a result of weak domestic demand. In particular, as Duncan Weldon pointed out in a blog earlier today: consumer spending fell considerably in the first quarter.
But it is not all bad news on the consumer-front. In fact, this week there have been two rather more positive developments:
- Earlier this week Barclays' survey of inflation expectations showed a significant drop in the median 12-month inflation expectations of the general public from 4.3% in January to 3.3% in April. This could suggest that consumers are a little less worried about squeezed incomes in the coming year.*
- Today GfK NOP released their consumer confidence indicator for May, which jumped by 10 points to -21, rising across all five sub-indices.
Both of these could be short-term blips, rather than longer term trends. In particular GfK NOP note that their index could be showing a temporary bounce due to “the feel-good factor of the Royal wedding and a double-whammy of sunny bank holidays, or to the recent let-up in negative reporting about the state of the economy”.
Whatever the case, if the joys of spring have provided a little respite for the British consumer, this is no bad thing!
* The Bank of England's own inflation expectations survey is due out on the 9th June.