New Analysis of Genworth Financial consumer index shows households anticipated recession in 2007 and 2008
London (November 1, 2010) - In the run-up to the launch of the 2010 Genworth Index, a measure of consumer financial vulnerability in households across 18 major countries; specialist insurer Genworth Financial has commissioned Oxford Economics to assess the first three waves of the annual study, to examine and identify the predictive power of the Index.
The new analysis reveals that the Index is a key indicator of households’ confidence in the economy, which is itself strongly correlated with the business cycle. The Index scores indicate that the global recession triggered by the financial crisis was anticipated by households in 2007 and 2008. Moving into 2009, the scores also suggest that households were able to identify the subsequent different recovery paths across Europe.
Oxford Economics’ analysis shows there is a strong link between the Index results and shifts in unemployment in those regions, indicating that job security is the key link to financial vulnerability.
Incomes, and the cost of borrowing, have in contrast not affected consumers’ feelings in the same way as concerns about job security. Government spending also seems to have had minimal impact to people’s everyday lives. Whilst budget deficits, and government spending, supported the major European economies in 2008-2009, they did not boost consumer perceptions of financial security. This resulted in Index scores and GDP taking different paths.
The UK and Ireland
In Ireland, huge rises in the 2008 and 2009 Indices were accurately matched by falling consumption, rising unemployment and a collapse in GDP growth. In contrast to the rest of Europe, which saw the first signs of recovery in 2009, Ireland’s vulnerability level continued to rise, showing an appreciation of the true scale of the debt crisis.
The Scandinavian effect
Peter Barrett, senior vice president of lifestyle protection at Genworth Financial, commented: “Genworth Financial is committed to helping more people create financial security around the world and we look forward to sharing the results of 2010 Index with policy makers in the coming weeks. Since the last Index was published there has been massive political change in many countries, the implementation of austerity measures and a continued scarcity of consumer credit. It will be interesting to see how these have contributed to consumer perceptions of vulnerability and security.”
Andrew Goodwin, economist at Oxford Economics, commented: “Our analysis suggests that the Index has a good track record of predicting economic trends. The Index scores indicate that the current global recession triggered by the financial crisis was anticipated by households in 2007 and 2008. Moving into 2009, the scores also suggest that households were able to identify the subsequent divergent recovery paths across Europe.”
Click here to read the new analysis by Oxford Economics and the previous Genworth Index reports.
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