Spending Power Report - June
23 June 2014
Consumer sentiment continues to rise as essential spend pressure stays stable, says Lloyds Bank
- The Lloyds Bank Spending Power Report measure of consumer confidence rises for the fifth consecutive month in May to a new survey high
- Overall spending growth on essentials remains stable, around 0.5% higher than a year ago
- Gas and electricity spending declines for the first time, while spending on fuel continues to fall
The Lloyds Bank Spending Power Report for May reached a new survey high of 146 points for consumer confidence since the survey began in November 2010, continuing the trend of increased consumer sentiment since early 2013. Limited growth in essential spending – at only around 0.5% higher than a year ago – has helped to ease the pressure on consumer wallets.
Among categories of essential spending, there has been a notable fall in customers’ energy bills, with average spending around 0.5% lower than a year ago. In addition to the recent stability of energy prices, warm weather has likely helped lower demand. Automotive fuel spending also continues to fall sharply, around 6% lower than this time last year.
Patrick Foley, Chief Economist at Lloyds Bank, said: “Positive news about the UK economy continues to accumulate, with firm growth, rising employment, and falling inflation all supporting a rise in consumer sentiment. Although wage rises still remain subdued, limited pressure on consumer wallets from spending on essentials bodes well for growth in discretionary spending in the months to come.
Consumer sentiment towards the country’s financial situation has improved in May with the balance of opinion (those who feel the country’s financial situation is “excellent”, “very good” or “somewhat good” versus “not good” or “not good at all”) standing at -32%, an increase of 9 points from last month.
Those in Wales and North East are amongst the most negative at -50%. This is in contrast to Greater London, which remains the most positive region with an 8 percentage point increase from last month to -14%.
There has been little change in feeling towards the housing market with the balance of opinion stable at -4%. Wales and Scotland hold a negative opininon at -24% and -22% respectively. South East England is the most positive at 5%, followed by the South West at 4%. The East of England, despite still holding a positive sentiment at 3% has seen a big fall from 17% in April.
Sentiment towards the country’s employment situation has improved further in May, up 8 percentage points to -28% this month. Those feeling the situation is “excellent”, “very good” or “somewhat good” has reached 36%, up 4 points from April and 22 points from this time last year. The North East and Wales are two of the most negative regions, with a balance of -48%. Greater London and the East of England are the most positive at -5% and -7%.
Consumers’ sentiment towards their own personal finances continues to improve with the net balance of opinion firming by 4 percentage points from April, taking it to +18%. Opinion has notably improved among those aged between 45-54 over the last few months, now reaching a positive balance of 7%. Opinion for Northern Ireland continues to be the most negative, with a balance of opinion of 6% in May, while the West Midlands is the most optimistic region, with a balance of +25%.
Philip Robinson, Director of Personal Current Accounts at Lloyds Bank said: “Positivity towards peoples’ finances is helping to have an impact on consumer confidence. The recent fall in food prices together with inflation figures are really helping to drive this sentiment. This is good news for consumers, especially in the lead up to the summer. However, people are still feeling the squeeze so it is worth planning for summer carefully to make sure we’re not overspending and can still be in control of our finances.”
The balance of opinion on future discretionary income between those feeling they will have more versus less money in the next six months remained stable at +6% in May, rising up 12 points compared to this time last year. In contrast to previous months, Wales and Yorkshire & Humberside regions have seen sentiment ease to negative net balances of -11% and -3% respectively, along with the North East region, which continues to have a negative balance of -2%.
Sentiment towards future saving sits at 12% in May, an 11 point increase compared to this time last year. Those living in Greater London continue to be the most positive at 25%, with Northern Ireland now the most negative region at -2%.
Meanwhile, the balance of opinion on the future of spending was little changed on the month, but remains 5 points higher than a year ago. Those aged 18-24 continue to be the most negative age group towards future spending, down from -3% in March to -12% in April and is now -16% in May.