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IMPROVING JOB SECURITY TO SUPPORT RETAIL SPENDING
Our monthly survey of over 2,000 consumers shows that job security improved again this month, edging up 1 point to -13%, taking the net balance to the highest level since January 2010. Respondents who reported greater job security increased 4 points to 19%, a level last recorded in 2007. This improvement, alongside the recent boost to real household income, should remain supportive to retail spending (Chart B).
Last month’s large improvement in the job prospects index remains supportive for the forthcoming labour market data release. The index remains above levels observed in June and July but retraced most of August’s large gain, falling 6 points to -49% this month. The proportion of consumers that thought job prospects deteriorated compared with a year ago rose 5 points to 61%, similar to levels recorded in the summer. Overall, our employment indices have yet to turn decisively lower and remain consistent with the reported rise in the official employment rate. However, the resilience in the labour market may signal that further improvements in job prospects will be modest ahead of seasonal hiring this Christmas.
ON BALANCE, MORE QE LIKELY TO BE ANNOUNCED IN NOVEMBER
The change and the level of the Consumer Barometer interest rate expectations index remain consistent with further stimulus in November (Chart C). Consumer interest rate expectations remain historically low, despite moving up for the second consecutive month and historically low refinancing rates. The Bank of England Credit Conditions Survey highlights consumers’ access to secured credit has increased significantly in the last three months and a further significant increase is expected in Q4. However, the low level of net consumer credit overall suggests this news is unlikely to trigger any immediate inflation risk to the economy.
However, consumer inflation expectations have risen for the third consecutive month, increasing 3 points to 78%, a 13 month high. The proportion of consumers that thought prices will increase in the coming year was up 3 points to 81%, while the proportion that expect prices to fall remained stable at 3%. The current prices component of the Consumer Barometer also increased this month, rising 3 points to 82% (Chart D). This increase is moderate and not inconsistent with previous policy easing, however it may intensify the QE debate in coming months. On balance, the addition of further QE in November remains likely, but it is a now a closer call than three months ago.
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