Confidence not dented by election uncertainty

With two weeks until May’s general election, the polls still show that no party is likely to win an overall majority and the composition of the next government is unclear. Despite this ongoing uncertainty, consumer confidence has remained buoyant. This reflects the fact that confidence tends to be driven by factors such as unemployment, wage growth and the cost of living, which have all improved, rather than political factors. And with unemployment set to fall further and real wages likely to rise at their strongest rate in over a decade this year, the prospects for consumer spending remain bright, and we have pencilled in a 3% annual rise in real terms in 2015. Nonetheless, regardless of which party is in power after the election, fiscal austerity is set to resume next year, which is likely to take some of the steam out of the recovery in spending.