Households have more money but are too scared to spend it

The headlines from the High Street are still grim.  Sales in retail stores in May fell backwards by 1.6% year on year according to ONS.  And while the pace of online consumer spending is still upwards, growth is now single digit rather than over 30% as it was last year, according to the BBC News.

A TUC report on unemployment generated the headline “Jobs Outlook As Bleak as 1980s”.  “The picture for jobs and growth is already bleaker than the last recession, and is looking much more like the deep recession of the 1980s every day,” said TUC general secretary Brendan Barber.

But read below the headlines and a different picture can emerge.  The National Institute of Economic and Social Research (NIESR) estimated that the UK economy resumed growth in April and May.  And now a study from Ernst & Young reports that the average UK household in the UK (that has had no change of employment status ) has 25% more money to spend on discretionary purchases each month than at the same time last year.

According to their Annual Discretionary Income Study the typical British Household has an additional £200 per month. That’s [italic] £200 per month.  This is a very significant amount of money.  Generated by savings from fuel and mortgage bills and cuts in interest rates on loans it is in effect being saved for a rainy day.  I would argue that it is time the media industry took an interest in this £200 per month.  For the economy to recover we need to get some of it spent, and the usual advertising methods are not doing the job.

Pre-recession persuasion tactics are not enough.  This is no time for “feel good” strategies, or reference to life’s little luxuries.  The British population is in no mood to feel anything but anxious.  Instead we need to focus on the Nouveaux Nervous and work out what will motivate them to put their hands in their pockets.

The new mood is one of austerity, but not quite of financial fasting.  But all purchases have to primarily represent good value for money.  It’s the perfect moment for that Waiitrose Essentials new advertising.

So it is no surprise to me that shopping in the High Street should dip in May.  Who in their right minds would go out and spend money when the June/July sales are sure to be the best ever?

The media industry must play our role in helping the economy out of recession and into growth.  We’re witnessing a significant shift in consumer attitudes that won’t change back for the rest of this year at the very least.  Any strategies set against consumer insights from 2008 that haven’t been radically reviewed need an urgent overhaul.  The average UK consumer is monied, but worried, and needs to see and hear concrete arguments to make them put their hands in their pockets and pull out some cash.

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