Consumer confidence has continued its upward trend, with the Lloyds Bank Spending Power Report for January seeing confidence rise six points from last month and reaching a new survey high at 129 points.
Confidence about the UK’s economic situation has seen the greatest improvement, rising a further 12 points from December 2013 and a total of 91 points compared to the beginning of January 2013.
Despite essential spending growth overall remaining little changed from last month, spending growth on gas and electricity bills is still growing rapidly at around 6% on a year ago compared to around 7% last month. It remains a source of inflation concern for 77% of respondents. However, fuel spending continues to fall, with spending around 2% lower than last year.
Patrick Foley, chief economist at Lloyds Bank, said: “Continued gains in consumer sentiment reflect the ongoing improvements in the UK economic backdrop. With the pressure on consumer wallets from essential spending remaining muted, if employment continues to firm and, looking ahead, wages begin to rise, boosting spending power, the greater capacity of consumers to undertake discretionary spending should place the recovery on a still-firmer footing.”
Following the launch of Help to Buy in January, positive sentiment about the housing market continues to rise, by 3% this month to 44%. Those in Greater London remain the most upbeat, with 54% of respondents feeling positive about the housing market. Those in Northern Ireland have the most negative view, with 68% feeling it is ‘not good’ or ‘not good at all’.
The employment situation continues a positive trend with those feeling that the employment situation in the UK is ‘not good at all’ down 2% on last month to 27%, a 12% drop on this time last year.
Consumers sentiment towards their own personal finances improves this month with 57% of respondents saying it is ‘excellent’, ‘very good’ or ‘somewhat good’ compared to 54% last month. Additionally, the net balance of respondents at 12%, is the highest since the survey began.
The balance of opinion on future discretionary income all time high in January, with more people thinking they will be better off in six months time than they are now, than those that think they will be worse off – (net balance of +2%). This positive balance is reflected throughout the UK. However, the balance of respondents who feel they are likely to spend more in six months time fell to -9%, the lowest since December 2011.
Instead of choosing to spend, consumers appear inclined to save more and pay down debt. Consumers who feel they are able to pay off their debt in the future has increased, with the balance of opinion between those who feel they will be able to pay off much more of their debt versus less rising from 7% to 11% this month. The balance of opinion between those feeling able to save more in future versus less also increased, rising from +6% to +14%.
Additionally, of those who do not currently have any discretionary income, there has been a sharp rise in the number of consumers who state they would save if they had any money left over at the end of the month, from 65% in December to 71% in January.
