The most recent Bank of England/GfK NOP Inflation Attitudes Survey for August 2012 gives us an interesting look at the mindset prevailing throughout the United Kingdom. While such surveys of the public may seem to be irrelevant, in today's economy where GDP growth is largely driven by consumer spending, consumer attitudes play an increasingly important role in what lies ahead for the economy.
Here are a few of the high points from this quarter's survey of 1,929 members of the public:
1.) Respondents to the survey expected that inflation over the coming year would be 3.2 percent (down from 3.7 percent in the May survey) and that inflation will be 2.8 percent in the following year (down from 3.4 percent in the May survey).
2.) By a margin of 67 percent to 6 percent, those surveyed believed that the economy would end up weaker rather than stronger if prices started to rise faster.
3.) Less than half of those surveyed (46 percent) thought that the inflation target was "about right" with 24 percent stating that the target was too high and 16 percent stating that the target was "too low".
4.) Over the next year, 35 percent of those surveyed expect interest rates to rise (down from 41 percent in May). Only 8 percent of respondents expect interest rates to fall over the next 12 months.
5.) When asked what would be "best for the economy, higher rates, lower rates or no change", 17 percent felt that rates should rise, 23 percent thought rates should drop and 33 percent thought that rates should stay where they were. When asked what would benefit them most personally, 23 percent stated that rates should rise and 28 percent thought that rates should drop. Please note that it is this period of ultra-low interest rates that have caused savers and pensioners to see the value of their savings and pensions erode.
6.) Most interestingly, respondents were asked to assess how well the Bank of England is "doing its job to set interest rates to control inflation". The net satisfaction balance, the proportion satisfied with Sir Mervyn's performance minus the portion dissatisfied, was +6 percent, down from +11 percent in May 2012. That's hardly a ringing endorsement, is it? Actually, this is the lowest net satisfaction result since polling began in 1999; in this survey, only 35 percent of Britons felt that satisfied with the Bank's use of its powers compared to 29 percent who stated that they were dissatisfied.
It would be interesting to see the results of a similar poll for Mr. Bernanke and the Federal Reserve, wouldn't it?