Candidate name: Sara Risti

UK consumer confidence tumbles in

October on job insecurity - survey
(Reuters) - Consumer confidence in Britain took its biggest tumble in four years this month
as workers in low-paid sectors worry about losing their jobs in an economic slowdown, a
survey published on Thursday showed.
The Consumer Confidence Index, produced by polling firm YouGov and economic
forecasters CEBR, slid by 2.9 points to 111.2 points, its lowest level since January and its
biggest monthly fall since October 2010.
"While employment levels are up, many jobs are low-paid and unsecure, and it is these
workers that are looking ahead to the coming year with some trepidation," Charles Davis,
director at the Centre for Economics and Business Research, said.
Britain's unemployment rate fell to 6.0 percent in the three months to August, its lowest
since late 2008, but job creation has slowed and wage growth remains very weak.
Official data on Friday is expected to show that British economic growth slowed to a
quarterly 0.7 percent in the July-September period, down from 0.9 percent in the second
quarter but still above the average growth rate.
The YouGov/CEBR survey showed employees increasingly expect slower growth in business
at their place of work over the coming year, feeding already growing concerns about job
security.
The Bank of England has said it expects British economic growth next year to ease to 3
percent from 3.5 percent in 2014 although that forecast was made in August, before signs of
a sharp slowdown in the euro zone and weaker growth in emerging markets. The BoE is due
to announce fresh forecasts next month.
The YouGov/Cebr Consumer Confidence Index collects data on a daily basis throughout the
month, conducting up to 7,000 interviews per month with people aged 18 and over.

Candidate name: Sara Risti

Schomberg, William. UK consumer confidence tumbles in October on job insecurity survey.
Reuters UK. Oct 23 2014, <http://uk.reuters.com/article/2014/10/22/uk-britain-economyconfidence-idUKKCN0IB2QM20141022> (1.3.2015.)

The article UK consumer confidence tumbles in October on job insecurity survey

was posted on the website Reuters in October 2014. Its main concerns are the fall in consumer
confidence (the degree of optimism that consumers feel about the overall state of the economy
and their personal financial situation1) due to high numbers of jobs with low wages and the way
this wave of unsatisfaction is affecting UKs economic growth (the increase in the market value
of the goods and services produced by an economy over time, measured as the percent rate of
increase in real gross domestic product per capita).

1 Consumer confidence - Wikipedia, the free encyclopedia, unknown,

<http://en.wikipedia.org/wiki/Consumer_confidence> (1.3.2015.)
2

Candidate name: Sara Risti

The first part of the article talks about the fall in consumer confidence by 2.9 points in
October 2014 resulting in the lowest consumer confidence index of that year. Consumer
confidence is a factor in consumption (total spending by consumers on domestic goods and
services) that in turn is a factor of aggregate demand (total spending on goods and services ina
period of time at a given price level). If consumer confidence falls, that means that there will be a
decrease in the overall consumption of products, which, if not leveled out by other factors of AD,
investment, government spending or net exports, can lead to an overall fall in AD which in turn
lowers the money supply in the economy, causing producers to have to cut costs of production,
usually in the number of available jobs leading to high unemployment.

Graph
1
In this case, the fall in confidence is due to a high number of low paying jobs,
because
people are [having] concerns about job security. Britain's unemployment rate fell to 6.0
percent in the three months to August, its lowest since late 2008, but job creation has slowed and
wage growth remains very weak; this shows the attempt at creating more jobs to lower the
unemployment rate. But these jobs are not attractive because not all people are willing and able
to work at any given wage rate; this is called natural or equilibrium unemployment which occurs
when he market is in equilibrium.
Graph 2

Candidate name: Sara Risti

Graph
relation
ADL

2 shows the
We
between
(aggregate
demand for
labour),
ASL
Q
Q1
e
(aggregate
supply
for labour)
and LF
(total labour
force).
When the
market
is
at
equilibrium,
the
number of
jobs
match the
number
of
people
looking
for jobs (ASL). There is enough jobs, but people are unwilling or unable to take them (LF)
causing unemployment a-b. This is the case in the UK; there are many unstable jobs, like
working in fast foods, seasonal, underpaying, and people do not feel safe about their job security,
causing lower consumer confidence, and so it is more likely that they will save their money in
banks (a leakage in the circular flow of income) than spend it which in turn lowers the money
supply in the country leading to a number of problem like inflation (sustained increase in the
general level of prices for goods and services) and greater unemployment.
The second part of this article says that the economic growth has slowed to a quarterly
0.7 percent in the July-September period, down from 0.9 percent in the second quarter but still
above the average growth rate. As defined before, economic growth is the increase in real gross
domestic product per capita, GDP being "an aggregate measure of production equal to the sum of
the gross values added of all resident, institutional units engaged in production (plus any taxes,
and minus any subsidies, on products not included in the value of their outputs). 2" It is
reasonable to see that economic growth has slowed due to the lack of consumption due to the
lack of consumer confidence. If such a situation persists in the short term, the quarterly GDP
growth rate may become lesser in comparison to other quarters, but if the consumer confidence
changes i.e. the consumers have securer job positions, they recive informataion that the economy
2 OECD Glossary of Statistical Terms - Gross domestic product (GDP) Definition,
July 1 2002, <http://stats.oecd.org/glossary/detail.asp?ID=1163> (1.3.2015.)
4

Candidate name: Sara Risti

is expanding, they will have a moer optimistic outlook and seek to spend more money. But, if
this problem is not taken care off, the long term conequences could first lead into a negative
growth of GDP and as the people believe less and less in the strength in their economy, they will
save more, imploring the government to increase their intrest rates that isf not managed can
cause inflation.

Table 1

Bibliography
Books

3 Quarterly National Accounts : Quarterly Growth Rates of real GDP, change over
previous quarter, Mar 1 2015, <http://stats.oecd.org/index.aspx?queryid=350>
(1.3.2015.)
5

Candidate name: Sara Risti

Blink, Jocelyn, and Ian Dorton. Economics: Course Companion. Oxford: Oxford UP, 2007.
Print.
Websites
Consumer confidence - Wikipedia, the free encyclopedia, unknown,
<http://en.wikipedia.org/wiki/Consumer_confidence> (1.3.2015.)
Quarterly National Accounts : Quarterly Growth Rates of real GDP, change over previous
quarter, Mar 1 2015, <http://stats.oecd.org/index.aspx?queryid=350> (1.3.2015.)
YouGov | Collapse in consumer confidence even greater than first thought, 2015,
<https://yougov.co.uk/news/2014/10/31/collapse-consumer-confidence-even-greater-first-th/>
(1.3.2015.)
OECD Glossary of Statistical Terms - Gross domestic product (GDP) Definition, July 1 2002,
<http://stats.oecd.org/glossary/detail.asp?ID=1163> (1.3.2015.)