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The 25th Financial Activity Survey commissioned by financial research specialist JGFR from GfK NOP shows little change on the record low intended activity in last quarter’s survey.

This suggests the trading outlook for retail financial services businesses in the coming months is set to remain depressed, hit by a combination of weak demand and, increasingly, constrained product supply.

This quarter’s survey does however show an improvement on the New Year quarter with the proportion of people expecting to undertake one or more of 18 specified savings, investment or borrowing activities up from 67% in December to 73% in March – although down on 75% a year ago and below the 6 year average of 78%.

The intensity of activity, although up on last quarter, from some 23.7 million to 25.3 million adults expecting to undertake 2 or more activities, is down on 26.6 million in March 2007, in turn some 5 million lower than in March 2006 (31.5 million).

More people intend to save/invest than in December – up from 58 % to 63%, although down from 67% a year ago. A similar picture is in borrowing with the proportion of intending borrowers up from 14% to 18%, although there is little change in borrowing expectations compared to a year ago.

A feature of the past year has been the improvement in household finances as people avoid/reduce debt and become more cautious over spending. Following a drop in debt repayment intentions for the past three quarters, in line with a fall in borrowing activity, this quarter debt repayment intentions have picked up again. Of the estimated 10.5 million people intending to undertake only one activity 2 million (19%) expect only to repay debt.

Three of the four main FAB indices (based on a 2-quarter moving average to offset seasonal influences - Q3/Q4 2002=100) improved on the quarter, although all indices are down on a year ago.

The overall FAB Activity Index rose from 87.5 to 88.3 (Spring 2007 92.4)

The FAB Savings/Investment Activity Index slipped to 91.7 from 92.5 last quarter and from 98.7 a year ago

The FAB Borrowing Activity Index rose to 68.3 (67.4 last quarter, 74, a year ago)

The FAB Debt Repayment Index rose to 78.1 (73.2,84.4)

Across the eighteen activities covered in the survey, most saw a rise compared to the very weak New Year survey.

Rising cash deposit intentions set to trigger strong institutional competition

The most popular activity is placing a cash deposit (36% of adults). More people intend to deposit cash, up from 34% last quarter and little changed on a year ago. Fewer people (30%) expect to contribute to an ISA in the coming months compared to a year ago (34%).

Overall net life and pensions demand (35%) is down compared to a year ago (40%), while investor sentiment is close to its 2003 lows, although there are relatively few sellers in prospect. Demand for government or corporate bonds is slightly below a year ago.

Gloomy consumer credit outlook apart from small improvement in car finance demand

The outlook remains gloomy for the consumer credit industry, particularly credit card, overdraft and personal loan borrowing. Overall 10% of adults expect to borrow by unsecured credit, down slightly year-on-year. The one slightly brighter spot is demand for car finance, this picked up from its December low, although its index (70) is well down on March 2007 (78) and remains historically low.

But a rise in housing market indicators…from a weak base

For the first time since last June, both housing market indicators point to increasing activity. The mortgage index rose to 74.9, up from 66.7 in December and its highest since last June while the property purchase intentions index rose to 87.1 from 85.4, although well down on March 2007 (98.8). In London demand for mortgages rose sharply – the London Mortgage Index rose to its highest (114.5) since December 2005, while property purchase intentions, although up on the quarter were insufficient to prevent the London Property Purchase Intentions Index (160.8) falling to its lowest since December 2006

Remortgage intentions will have boosted the former, while the spring buying season may attract hopeful bargain hunters.

Big regional differences in demand – South West and Wales set to be most financially active

Regional differences in financial activity are very apparent. Highest levels of activity are found in the South West (79%) and Wales (78%), with the lowest in Yorkshire/Humberside (64%).

Commenting on the survey findings John Gilbert, Managing Partner of JGFR said:

‘The combination of very weak consumer confidence and financial well-being are reflected in the continuing depressed savings, investment and borrowing intentions. This will intensify the difficulties of financial businesses generating revenue growth, particularly when one of the few bright spots is in mortgage demand where supply is being withdrawn. There is a growing possibility of a liquidity squeeze on consumers with many people cast adrift in unchartered waters and becoming forced asset sellers’

Notes:

The 25th Financial Activity Survey was undertaken by GfK NOP for JGFR among 2,007 adults aged 16+, representative of the UK population, between 7–16 March.

The survey is housed on the same GfK NOP omnibus as is the March UK Consumer Confidence Survey carried out for The European Commission. Some cross-analysis between the two surveys is undertaken in the Financial Activity Bulletin.

A full analysis of the survey is in the Spring Financial Activity Bulletin, published in electronic format on April 14th.

A detailed analysis of higher earning households is produced in the Higher Earners Report by JGFR – ComPeer.

Enquiries: John Gilbert 0208 944 7510 / 07740 027968



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