While there is significant disparity between the perceived effect of the recession on consumers and its actual effect on their day-to-day financial lives, such perceptions are perpetuating the problem.
When consumers were challenged by Datamonitor's Financial Services Consumer Insight survey to examine ways in which the recession has impacted their day-to-day lives, the results were revealing. Despite 90% of UK consumers thinking that their country is in recession, 53% think that their household financial situation has either improved or remained the same.
This dichotomy in perception versus the reality of people's financial situation has also been reflected in Friends Provident's survey. According to the Generation Recession report, twice as many people feel their job is safe as those who have actually lost or fear they will lose their jobs (50% versus 27%). Anna Large, retail banking analyst with Datamonitor confirms: "Datamonitor's Financial Services Consumer Insight Survey 2009 indicates similar findings - in the UK, 63% of consumers feel that confidence in their job security has remained the same compared to a year ago, whereas only 31% actually think it has worsened." Comparative global figures were 52% and 34% respectively, and an impressively positive 14% actually indicated improved confidence in their job security.
Datamonitor's findings also confirm other details of the Generation Recession report. This includes the assertion that the younger generations are showing signs of particular financial conscientiousness going forward, despite the emerging trend that consumers appear to feel relatively unaffected by economic hardship. Their level of concern about the state of their current account or overdraft, for example, has shown only a 3% increase since before the recession, but 65% of 18-24 year olds say that they will now manage their finances in greater detail. More than a third (38%) agreed they are now trying to learn more about the financial world, compared to 32% of 50-64 year olds. Datamonitor can therefore echo Friends Provident's UK managing director, Simon Clamp, who suggests that, "it's encouraging that…the younger generation, have taken the opportunity to become more financially savvy as a result of the recession."
Large observes: "This increased conscientiousness in the younger demographic bodes well for consumers' future ability to deal with recession, but it is important to note that this is the age segment best placed to react that way." Less significant financial obligations and generally fewer dependents mean that the young can show greater flexibility in their financial behaviors.
Similarly, it is important to make clear that the concept of the global recession as 'psychological' should by no means serve to trivialize it. The knee jerk psychological reactions that consumers have had to real life recessionary events are primarily responsible for the perpetuation of the recession.
As is evident from Datamonitor's findings, in the majority of households there does not appear to have been any significant increase in financial strain that results in consumers displaying recessionary behavior. On the contrary, only 8% globally think that their household's general financial situation has worsened significantly since before the downturn, and thousands have actually benefitted from reduced mortgage repayments, for example.
Anna Large says: "It would appear that the spending shock that consumers have gone into as a response to events has served to draw out the economic slowdown, and the same will apply during recovery." She concludes: "The communication of positive messages through the government, the media and the banking industry is what is needed to facilitate a psychological shift and confidence boost amongst consumers, bringing about a 'Psychological Recovery'."
