Consumer confidence rises on back of housing market

Consumer confidence in the economy has improved to its strongest levels in at least two-and-a-half years as optimism about the housing market and jobs rises, a report has found.

Sentiment towards the housing market is at its strongest since Lloyds Bank’s Spending Power report began in November 2010, while worries about employment were also found to have eased.

Almost one fifth (18 per cent) of people felt positive about the economy in August, showing a sharp increase from just over one in 10 (11 per cent) in January. The proportion of people feeling negative about the economy fell to 31 per cent, the lowest level since research began.

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These findings helped Lloyds’ overall consumer sentiment index to rise to an all-time high of 115 points in August, marking a 10-point increase since the start of the year.

Patrick Foley, chief economist at Lloyds Bank, said the findings are “very encouraging”.

He added: “Increasing consumer sentiment may in time embolden consumers to spend, so helping to underpin the wider economic recovery. In turn, such spending would further help improve the outlook for growth and jobs.”

A new high of 39 per cent of consumers were feeling positive about the housing market, which has recently seen a surge in activity following Government schemes such as Funding for Lending which have improved mortgage availability and led to some lenders offering their lowest ever rates.

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House prices have also been back on an upward march in recent months, helping some home owners who have seen falls in the value of their property in recent years.

People living in Northern Ireland were the most likely to be downbeat about the housing market. Nearly three quarters (74 per cent) of those surveyed in Northern Ireland said the housing market is “not good” or “not good at all”, as did 72 per cent of those in the north of England.

Meanwhile, negative feelings towards the employment market continued on a downward trend. Some 81 per cent of consumers said the jobs market is “not good” or “not good at all”, marking a decrease from 82 per cent in July and 87 per cent in May.

Young people were the most likely to be upbeat about the employment market. More than one fifth (22 per cent) described it as “somewhat good”, compared with 16 per cent of consumers generally.

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People are also feeling less negative about how much money they will have in the coming months. The overall balance between those who feel they will have more money in the future minus those who predict they will have less was minus three per cent in August, improving from minus five per cent in July.

London is the only UK region where people feel positive about their future financial situation overall, with a balance of 10 per cent saying they will have more money in the future, jumping from three per cent the previous month.