Improving job security to support retail spending

• The Consumer Barometer job security index improved to its highest level since January 2010 and job prospects have not reversed significantly this month; both should continue to support retail spending.  
• Overall consumer sentiment still suggests further monetary stimulus at the November MPC meeting, although this will be a closer call than 3 months ago.  
• Consumer inflation expectations have increased for the third consecutive month, although inflation has stabilised as global economic activity has slowed.  

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.

Disclaimer

This document is confidential, for your information only and must not be distributed, in whole or in part, to any person not involved with the proposed transaction without the prior consent of Lloyds TSB Bank plc (“Lloyds Bank”). Whilst Lloyds Bank has exercised reasonable care in preparing this document and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. In particular, whilst we have sought to identify appropriate products and to provide guidance as to how those products might operate under various accounting standards we are not, and should not be considered to be, giving an accounting opinion or advice and you should conduct your own independent enquiries and seek your own professional advice in this respect. Any transaction which you may enter into with us will be on the basis that you have made your own independent evaluations based on your own knowledge and experience and any professional advice which you may have sought in relation to all aspects of the transaction including legal, regulatory, tax or accounting.

All terms contained herein, including pricing, are indicative only and subject to change without notice. This material has been prepared for information purposes only and Lloyds Bank, its directors, officers and employees are not responsible for any consequences arising from any reliance upon such information. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Lloyds Bank Sales representative for clarification.

Lloyds Bank, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc and Lloyds TSB Scotland plc. Lloyds Bank and Lloyds TSB Corporate Markets are trading names of Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ.

Registered in Scotland no. 327000. Authorised and regulated by the Financial Services Authority under registration numbers 119278, 191240 and 169628 respectively.