- Lloyds Bank Spending Power Index declines for third consecutive month, and is now at its lowest point for the year
- The proportion of people feeling that their household financial situation is comfortable is also in decline, and is at the lowest it has been in five months
- Private renters are particularly feeling the strain, with those who don’t have enough money to meet their monthly outgoings doubling in six months
Any improvements in consumer confidence at the start of 2015 have been reversed in the past three months, with levels reaching their lowest point for 2015 in September, says the latest Lloyds Bank Spending Power Report. A possible indication that the economic trends, which seemed to lift sentiment at the start of the year, are having less impact.
The sentiment of people surveyed towards future confidence remains unchanged from the previous month. However, all four measures contributing to the current situation saw further declines in September. People’s perception about their personal financial situation and Britain's employment situation were down two percentage points (-2pp) and three percentage points (-3pp) respectively.
At the same time, the proportion of people who say that they have disposable income dropped slightly in September, down two percentage points (-2pp) to four in five consumers (80%). This month’s drop in sentiment towards the current situation is further reflected by people’s decreasing positivity towards their household financial situation, down four percentage points from last month (-4pp).
Although the proportion of people who feel that their household financial situation is comfortable still outweighs the number who feel like they don’t have enough money to meet monthly outgoings, the net difference between the two is declining. With a balance of +17, this is the lowest it has been in five months (+20 in May). An increase in the proportion of people that say they are feeling ‘not good at all’ about their personal financial situation (+2pp, from 10% in August) may be contributing to this change.
Patrick Foley, Chief Economist at Lloyds Bank, said: “Spending power confidence continued to ease in September, providing further signs that the economic trends which lifted household sentiment through the first half of the year, such as lower inflation and improving labour market conditions, are exerting a waning influence on sentiment in the second half”.
“Nevertheless, with real wage growth strengthening and unemployment edging lower, the economic outlook remains generally positive. Indeed, despite current confidence easing back, household sentiment around prospects for spending and discretionary income remains stable, providing reassurance that the UK is well-placed to maintain a solid pace of economic growth.”
Proportion of private renters who can’t meet monthly outgoings doubles in six months
Amongst private renters, those who say they don’t have enough money to cover their monthly outgoings has doubled in the last six months from 8% in April to 16% in September. This may indicate that one in six of those in privately rented accommodation are finding it difficult to make ends meet.
Unsurprisingly, renters have a less optimistic view of the current situation than homeowners. Negativity has increased most for homeowners regarding the country’s financial situation and Britain’s employment situation (+4pp of not good/not good at all since August for the country’s financial situation and +4pp of not good/not good at all since July for Britain’s employment situation).
Negative sentiment for renters has also increased regarding the country’s financial situation and Britain’s employment situation (experiencing the same percentage point increase of not good/not good at all responses). However these are not the areas with the greatest increase of negative sentiment. The increase in negative sentiment for renters is greatest regarding their personal financial situation and own job security (+7pp of not good/not good at all since August for personal financial situation and +7pp not good/not good at all since July for own job security).
Actual spend on essentials continues to fall
However, despite people’s less optimistic sentiment, Lloyds Banking Group’s own economic data indicates that actual spend on essentials continues to decline, with its tenth consecutive fall in September. Customer spend on essentials in September 2015 was one percent lower than that spent over the same period a year ago, meaning that customers should be feeling better off after they have accounted for essentials. This measure has remained negative for 10 months (last positive growth seen in November 2014, suggesting that peoples’ perceptions are somewhat out of kilter or lagging with what economic data is currently indicating, according to the Lloyds SPR survey.
Rent and Food remain the only two categories of essential spend with positive growth on a year ago, whilst gas and electricity and fuel have the largest negative growth helping keep the overall measure down.