Job security fears spur seasonal gloom

Consumer fears over the security of their jobs have hit a six-month high, despite recent official data demonstrating the health of the UK labour market, according to the latest Consumer Barometer from Lloyds TSB Corporate Markets.

The December survey found that consumers felt increasingly negative about the safety of their jobs. This was illustrated by a sharp drop in the balance of consumers feeling more rather than less secure, to -4 per cent from -1 per cent in November; the lowest reading for six months.

On top of job fears, a record number of consumers reported feeling the pressure of higher prices, which does not bode well for Christmas spending figures. The survey found that 74 per cent of consumers felt prices were higher now than they were last year, causing the balance to rise 1 per cent to 71 per cent in December; the highest result since the survey began in November 2004. And consumers are braced for further increases in the New Year with 81 per cent predicting prices will rise in 2008.

Despite the fall in confidence over jobs and prices, consumers are increasingly optimistic about the prospect for interest rates in 2008. Even after December’s 0.25% reduction in the base rate, the balance of consumers expecting rates to be higher rather than lower next year dropped to just 25 per cent in December, from 43 per cent in November and 75 per cent only six months ago in June.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “The slump in confidence over job security, coupled with the pressure of rising prices does not bode well for the New Year. This combination could dampen consumer spending and have a knock-on negative impact on the housing market.

“However, the fact that official labour market data remains strong offers some hope that job fears may be short-lived. Although our survey suggests that December’s interest rate cut has so far had little impact on sentiment, a further two cuts early next year – which we expect – may offer a welcome boost to confidence.”