Feature Article: Dissaving should give some aid to a consumer recovery.

According to the article, UK consumers are expected to experience a recovery in consumption this year. This recovery will be driven by growth in incomes, as well as a willingness to borrow more and save less. However, factors such as high interest rates, inflation's impact on savings, and the lingering effects of recent economic shocks may limit the boost from dissaving. Despite these challenges, an improved financial outlook, stronger consumer sentiment, and low levels of household debt are expected to support consumer borrowing. While dissaving is projected to provide modest support to consumption in the coming years, it is unlikely to trigger a full-fledged consumption boom. The article also discusses the recent growth in consumer credit, which has been influenced by high inflation. Adjusting for inflation, net lending to consumers actually declined in 2023. However, the recent return to real-terms growth in credit may be sustained due to factors such as the issuance of credit cards with 0% interest deals and an improved financial outlook for households. The article also highlights the relatively healthy financial position of households, with the stock of unsecured debt falling to its lowest level since 1996. However, higher interest rates and economic shocks may have shifted attitudes towards debt, leading to higher repayment rates for credit card debt. The article suggests that psychology, including a desire to keep debt levels down in an uncertain economic environment, may be influencing these repayment trends. Additionally, households still hold substantial excess savings accumulated during the pandemic, although adjusting for inflation reduces the purchasing [Extracted from the article]