UK consumers rein in spending
At a time when the UK economy is beginning to struggle it seems as though more and more consumers in the UK are prepared to pay off their debts rather than increase spending - and potentially create more problems for the future. Figures from the Office for National Statistics show that during August UK consumers paid off a net £120 million from outstanding debts, UK mortgage approvals fell and the trend in consumer spending is most certainly beginning to turn.
The 1.2% increase in the UK economy in the second quarter of 2010 was something of a surprise and was mainly fuelled by a strong consumer market despite the economic backdrop. However, with £1.3 trillion of debt spread across UK households it seems that many believe now is the time to begin paying off this debt ahead of what could be a potentially difficult economic period. If UK consumers decide that enough is enough and rein in their spending then we could see a fairly sharp drop in economic activity which could, although still an outside chance, push the UK economy towards a double dip recession.
Investors and analysts will be keeping a very close eye on consumer spending in the run-up to Christmas although for many years the UK consumer has effectively put aside economic concerns during the festive period. Will this year be the same?
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