Consumer confidence continues to grow
Confidence is now 9 points higher than at the start of the year (105 in January 2013) and 10 points higher than the same time last year (104 in July 2012).
Consumer confidence in the UK’s economic situation has improved again, with optimism continuing to strengthen month on month. Similarly, worries over the employment situation and housing market are still receding, with both measures significantly more positive than this time last year.
The improvement in consumer sentiment comes at a time of improving data for the UK economy. According to the latest ONS estimates for economic output, growth in 2013 Q2 accelerated relative to the previous quarter, with employment levels also improving.
The majority of consumers remain concerned about the state of the UK’s financial situation; however a total of 16% expressed a positive outlook in July, up from 13% in June and 11% at the beginning of the year. Those most likely to remain pessimistic are aged 55-64 with 46% saying they do not feel good about the financial situation at all.
The number of consumers with a positive view of the housing market continues the upward trend seen to date in 2013 and has reached a historical peak at 34% compared to 31% in June and 23% in January and 22% in July 2012. Regionally, those living in the North continue to have the most pessimistic attitude towards the housing market, with 72% stating a negative view (down from 76% in June) compared to a UK average of 66%.
Consumer sentiment towards their own personal finances remained steady with 46% saying they held a negative viewpoint compared to 45% in June. However, this has still improved from July 2012 when 50% held a negative view of their personal finances.
Patrick Foley, chief economist at Lloyds TSB, said: “The further improvements in consumer sentiment this month are very encouraging but not surprising given the combination of better than expected economic data and stable growth of spending on essentials.
“In due course consumer sentiment may translate into firmer consumer spending and help underpin the wider recovery. If it does, this should eventually help to improve the outlook for the jobs market, which might then further reinforce sentiment.”
Areas of pressure on consumers spending remain however. Gas and electricity spending continues to grow rapidly, at more than 8% on a year ago, likely reflecting past price increases feeding through to bills, and automotive fuel spending accelerated to around 3.5% on a year ago.
But an increase in overall spending on essential categories to around 3.5% – the highest since June 2012 – also reflects an increase in spending on food and drinks. Such spending on food and drink, supported in July by favourable weather, has likely been discretionary at least in part, and potentially indicated not greater pressure on consumers but greater confidence and willingness to spend on higher value items or higher quantities.