The business impact of weak consumer spending

In the UK consumer (or household) spending makes up around three quarters of GDP. So the fortunes of a significant number of firms are closely tied to the strength of consumer spending. For shareholders or managers of such businesses, this article in the Guardian will not make happy reading.

The article summarises some recent evidence from a selection of important consumer markets which suggest that consumer confidence in the UK is as weak as it has been for many years. Faced with increasing uncertainty about jobs, higher fuel and food prices and saddled with debt, UK households are cutting back on discretionary spending. That’s bad news for manufacturers and retailers of “big ticket” items like new cars, carpets and entertainment systems.

You know that UK consumer spending is weak when the “bell-weather indicator” of John Lewis Partnership reports falling sales. JLP reported a second consecutive week of falling sales last week, with demand for electrical goods particularly weak.