You will have an extra £482 this year- will you spend it or save it?
So. It’s been sunny. Inflation has come down. You probably still have a job. Everything is just peachy. And in even better news, accounting impresarios Ernst and Young have produced a special report saying that, on average, we will be £482 better off this year and £624 better off next year, and that we will all celebrate by not necessarily spending all our money in the shops. Go us.
That’s right, a new report has been prepared by Ernst and Young sponsored ITEM club, the only non-biased non-governmental economic forecasting group to use the HM Treasury model of the UK economy, according to them. They claim that changes to personal taxation benefitting basic rate taxpayers and an easing of fuel prices and inflation will make us all feel like our wallets are bulging with unspent cash, causing some of us to rush out and remedy the situation.
The ITEM club’s top picks for what we will spend our money include audio visual goods, including TV’s, mobile phones and broadband, and “Recreation & Culture and Communications” with both of these sectors expected to grow by 4.2% this year. Buying a new car and eating out/ staying away are next on our spending lists.
However, apparently, we are a more sensible nation than the Bitterwallet readership would have us believe. The report suggests consumer spending will show only a gradual improvement from the middle of this year, but that spending levels won’t return to pre-recession levels until 2015.
So what are we doing with our extra few hundred quid? We are paying off our debts. How very grown up of us. Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club explained:
“After the tightest squeeze on consumer incomes in a generation, the worst is now behind us and most people should start to feel a bit better off by the end of the year. Wage growth will finally begin to outpace inflation and our pay packets will also be boosted by the tax changes announced in the Budget.”
“It’s an improving outlook for the UK high street but it’s going to be a slow and steady recovery. Rather than splashing their cash, we’re expecting to see conscientious consumers keeping a relatively firm grip on their purse strings. Instead, they are likely to focus on trying to pay down debt, taking advantage of a 12 month window before interest rates start to rise again” he continued, sensibly.
So are the economic boffins right? Are you starting to feel wealthier, or are you too scared to look up from the treadmill, just in case? Would you splash any extra cash on a TV and weekend away or send it straight to the credit card company? Isn’t this all relative- if the past two years have been as bad, economically, as the late 70s, doesn’t it stand to reason that we would feel better off in comparison?