Lloyds Bank

Spending Power Report - May

19 May 2014

Consumer sentiment stays high as essential spend pressure remains steady, says Lloyds Bank

  • The Lloyds Bank Spending Power Report measure of consumer confidence continues to rise, reaching a new survey high for the fourth month in a row.
  • Overall essential spending growth remains subdued, staying below 1% for the second consecutive month.
  • Spending growth on gas and electricity slows further, while spending on fuel continues to fall.

The Lloyds Bank Spending Power Report for April has found essential spending growth has stayed below 1% for the second consecutive month, amid a new survey high of 138 points for consumer confidence since the survey began in November 2010 – a rise of 29 points from this time last year.

Confidence in the UK’s current,  and future economic situation has continued to increase, with confidence in the UK’s economic situation seeing the greatest yearly improvement, with an index of 262 points, a 117 point increase from this time last year.

Among categories of essential spending, customers’ average spending on fuel is around 5% lower than a year ago, while spending growth on gas and electricity continues to slow, at around 1% in April compared with around 8% in mid-2013. 

Patrick Foley, Chief Economist at Lloyds Bank, said: “Continuing gains in consumer sentiment mirror the ongoing improvements in the UK economic backdrop.  Meanwhile, reduced pressure on consumer wallets from essential spending, strong growth in employment, and looking ahead, a pick-up in wage growth, are likely to boost spending power, improving the capacity of consumers to undertake discretionary spending.”

Current situation

Consumer sentiment towards the country’s financial situation was little changedin the month to April, with the proportion of consumers viewing the country’s financial situation as ‘not good’ or ‘not good at all’ down from 88% in April 2013 to 71% in April 2014. Specifically, the number of those stating it is ‘not good at all’ fell by 21 percentage points compared to this time last year.

A swing in consumer sentiment in the North East of England has seen confidence in the current financial situation improve slightly with the balance of opinion increasing by 8 points. Those in Scotland now hold the most negative sentiment towards the country’s financial situation, with 80% feeling it is ‘not good’ or ‘not good at all’, followed by those in Northern Ireland at 77%. This is compared to those in Greater London who feel the least negative at 61%.

Sentiment towards the housing market is also on the rise, with the balance of opinion continuing to edge towards an overall positive result. This is the fourth consecutive month that has seen a positive improvement, taking the overall balance of opinion to -4%, a 40 percentage point increase compared to this time last year. Those in Northern Ireland continue to have the most negative view, with the balance of opinion at -47%, down 15 percentage points from last month. Those in Scotland also hold a negative balance of -20%.

Feeling towards the country’s employment situation remains in line with last month following figures released last week showing a decrease in unemployment, with the balance of opinion between those who feel the employment situation is ‘excellent, very good or somewhat good’ versus ‘not good or not good at all’ staying at -36%. By comparison, the balance of opinion compared to this time last year is up 33 points from -69%.

Those in Northern Ireland have the most negative view of the state of employment, with the balance of opinion standing at -71%, compared to those in Greater London who have the most positive view at -20%.

However, the improvement in consumers’ sentiment towards their own personal finances continues with a positive balance of opinion up 8 percentage points from this time last year, taking it to +14%. Consumers aged between 45-54 continue to be the only group to have a negative opinion towards their personal finances, which has increased further from -4% last month to -7% in April.

Philip Robinson, Director of Personal Current Accounts at Lloyds Bank said: “We are now starting to see a more general air of positivity towards peoples’ finances. This will help build consumer confidence and have a trickle affect when it comes to consumer choice on their discretionary spend. Looking towards the summer, this is likely to rise in the months ahead, with customers feeling more in control of their finances.”

Future situation

The balance of opinion on future discretionary income between those feeling they will have more versus less money in the next six months has a positive balance of 6% this month, up from 5% in March and -9% this time last year. The North East region is the only region to have a negative balance of opinion at -3%, while younger consumers continue to be the most positive towards future discretionary income, with a further positive increase of 8 points, taking the balance of opinion to 34% in April.

Sentiment towards future saving has reached 14% for April, a 4 percentage point increase from last month and up 14 points compared to this time last year. Those aged 18-24 continue to be the most positive towards future saving, with the balance of opinion up by 5 points from last month to 47% in April.

Meanwhile, the balance of opinion on future spending, rose by 1 point to zero, the strongest since the beginning of the survey and a rise of 6 points from this time last year. With the economy continuing to recover and inerest rates, in tme, likely to rise, 71% of consumers said that any change in base rate ‘would not have much of an impact’ or ‘would be able to meet monthly outgoings’, if the rate were to rise from its record low.

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