Boost to spending power confidence

The latest Lloyds Bank Spending Power Report shows that consumer confidence in the value of the pound in the pocket continues to rise.

The bank’s Current Situation Index reached a new all time high in May, at 213, with respondents’ sentiments towards their personal finances improving by 3% since April, and their household finances increasing by 4%. At the same time, sentiment towards the country’s employment outlook improved by 8%.

Lloyds points out that in April the Consumer Price Index, the main measure of inflation, turned negative for the first time since 1960, and wage growth was showing further signs of strengthening. Although inflation rose slightly to 0.1% in May, both will have contributed towards a strengthening of household spending power.

However, confidence towards finances in the longer term has fallen recently, with the Future Situation Index (the measure of confidence towards finances in six months’ time) down for a third consecutive month (dropping by one point in May). It is now at its lowest level since August 2013.

Patrick Foley, chief economist at Lloyds Bank, comments: “While households continue to have an upbeat view of their current financial situation, confidence in the outlook continues to drift down. But with wage growth now strengthening, households are likely to develop a more positive view of the future, and this should allow the UK’s recovery to make further headway in the second half of the year.”