21st December 2015
Consumer confidence has enjoyed a boost in the run up to Christmas as sentiment towards current and future financial and employment situations improve, according to the latest Lloyds Bank Spending Power Report.
The latest measure built on gains made last month, as the Spending Power Index rose by three points in November, to stand at 161.
With unemployment at its lowest level since 2006 and signs of improved wage growth, respondents said they are feeling more optimistic about their current situation.
The increase was driven by improved sentiment towards personal finances, while feelings towards household finances, climbed significantly, rising 9pp, to reach an all-time high of 26%.
Patrick Foley, chief economist at Lloyds Bank, said: “Spending power confidence rose further in November, lifted by a more upbeat assessment of current circumstances, and a greater sense of optimism around the outlook.”
“With price pressures for essentials still subdued, and some improvement in wage growth becoming evident, households are continuing to feel better about their personal financial situation, particularly those who say money is tight. This bodes well for the UK’s solid pace of economic recovery being sustained in 2016.”
However renters’ sentiment towards their current situation remains worse than that of homeowners. But there were marked improvements for renters in attitudes towards their personal financial situation, up 8pp, while sentiment towards employment and current levels of inflation increased by 7pp a piece.
November also saw an increase in the bank’s Future Situation Index, up two points to stand at 112, its highest point of the year.
This was driven by a marginal increase in those who think they will have ‘more’ or ‘much more’ future disposable income in six months’ time – standing at 24%, up from 22% in October – and it was supported by stability towards own job security, which remained unchanged at 57%.
There has also been a marginal increase in those planning to pay off ‘more’ or ‘much more’ debt in the next six months, now at 18%, the highest figure this year. Those planning to save ‘more’ or ‘a lot more’ over the same period continues to rise slightly, up to 24% in November, from 23% in October.
Lloyds Banking Group economic data shows year-on-year spending on essentials fell for the twelfth consecutive month. Spending in November was 1.6% lower than at the same time last year – in October spend was down 1% on 12 months previously, marking a record low for the spending growth rate.
The deflationary rate remains largely driven by the continued the fall in fuel prices, with actual spend here declining at a rapid rate year-on-year, at -9.3%, as prices at the pump drop further.
The more significant decline in the overall spending growth rate in November can, in part, be attributed to a decrease in actual food spend, which accounts for 40% of all essential spend. This was down 0.6% year-on-year, compared to 0.3% last month.