Growing consumer confidence as upturn gains momentum

The majority of people expect their personal finances to improve in the coming months according to a survey from Lloyds Bank which has recorded consumer confidence at its strongest levels for three years.

The bank’s “spending power” index measuring consumer confidence rose by six points in January to reach a new all-time high of 129 points since its launch in November 2010.

The report, which surveyed more than 2,000 people across the UK last month, said the balance of opinion about their future level of discretionary income was at its most positive since records began.

A net balance of two per cent of people think they will have more money to spend in six months time rather than less.

The balance of people who are positive about the current state of their personal finances is also the strongest since the survey began, with 57 per cent describing their situation as excellent, very good or somewhat good.

But Lloyds said that instead of choosing to spend, people appear more inclined towards saving more and paying down debt. The balance of people planning to shave off more of their debts in the coming months rather than less rose to 11 per cent in January.

Meanwhile, a balance of 14 per cent of people expect to squirrel more money away rather than less in the future.

If the survey’s findings become a longer term trend in the coming months there could be significant political implications.

As headline figures on the economy have improved Labour has shifted its attack on the coalition away from the strength of the recovery to focusing on the cost of living.

If families start to feel the pressure on their finances easing and, critically, if wages start to rise faster than prices it will be much harder for Labour to make its charge that the recovery is not benefitting ordinary people stick going into next year’s General Election.

Figures released last week showed that inflation fell below the Bank of England’s two per cent target for the first time in more than four years in January.

The consumer prices index dipped to 1.9 per cent in January from two per cent in December and experts have predicted that inflation will remain under the twi per cent target throughout 2014, fuelling hopes that wage growth will finally overtake rises in the cost of living.

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.”

While the Lloyds Bank report suggests feelings about the UK’s economic situation have improved strongly over the last year, spending on gas and electricity bills is still “growing rapidly” at about six per cent on a year ago, the report said.

Gas and electricity bills remain a source of inflation concern for more than three-quarters of consumers, according to the findings.

The report showed that consumer confidence in the housing market continues to grow, following the launch of the Government’s flagship Help to Buy scheme last year, which gives people with a deposit as low as five per cent a helping hand on or up the property ladder.

People living in London, which has seen house price growth racing ahead of the rest of the UK, were found to be the most upbeat about the housing market, with 54 per cent of people living there feeling positive.

Those living in Northern Ireland were the most downbeat, with 68 per cent of people there saying the housing market is “not good” or “not good at all”.

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