- Attitudes towards current personal finances and the country’s financial situation both jump in March.
- However, with Easter spending occurring in March this year, people spent more on food and fuel last month, and felt they spent less on going out.
- Overall Spending Power confidence bounces to a new high of 158 in March 2015.
The latest Lloyds Bank Spending Power Report shows people surveyed are feeling more positive about their current situation and the state of the economy than they were last month, creating a jump in the Current Situation Index by 10 points. This has resulted in another rise in the Overall Index to a new high of 158. [Chart 1, see full release]
Improvements in sentiment towards the current situation are driven by an improvement in all four components of the index. Sentiment towards people’s[i] current personal financial situation improved by 3pp (to +24), and their household financial situation improved by 5 percentage points (pp) taking it to the highest level recorded (+17). The view on the country's financial situation has improved (+12pp to -8%), there is an improved outlook for the UK’s employment market (+6pp to -8%) and the proportion with some disposable income increased by 1pp to 79%.
In addition, Lloyds Banking Group economic data shows that March once again saw a fall in essential spending of -0.5% overall, although this fall in spending is slowing down from previous months (Feb -1.0%, Jan -0.6%[ii]).
This slowing down is largely caused by growth in food spend, which constitutes over 40% of essential spending and was up by 1.7% in March compared to this time last year. This comes after three consecutive months of no growth and is predominantly due to Easter spending occurring in March this year, in comparison to 2014 when this spending occurred in April.
Overall, the Lloyds Banking Group economic data shows year on year essential spending growth is still being held down by lower gas and electricity spending (-7.2%) and lower fuel spending (-9.4%) compared to last year. Whilst still negative at -9.4%, fuel spend growth has risen from last month (Feb -9.7%). This is reflected in the consumer research[iii] which shows rising fuel prices are beginning to be felt by consumers, with a 10pp increase in those saying they are spending more at the pumps.
March’s consumer research showed that after two consecutive months of increased positive sentiment towards inflation with lower spending on food and fuel, there has been a small swing away from those feeling excellent or very good about it. This has brought the balance of opinion towards the current levels of inflation to +25 (down from +30 in February). At the same time, there has been also been a 5pp decrease in the balance of opinion on spending on going out and treats, with 37% saying they are spending less on this than they were 12 months ago.
Claire Garrod, Head of Personal Current Accounts at Lloyds Bank, said: “Spending power is continuing to grow and is being driven by more confidence about people’s current individual and household financial situations. However, with Easter spending occurring in March this year, we have seen increased spend on food and fuel last month, although levels of spending are still lower than at the same time last year.”
The Future Situation Index remains stable at 110 and the perception of people surveyed towards their future discretionary income also remains stable. Of those who believe they will have more money in six months’ time, over a third (34%) expect to pay off more debt, which has risen 5pp in the last month. Seven in ten (70%) of this population plan to save more, compared to 69% in February.
Patrick Foley, Chief Economist at Lloyds Bank, said: “As a stronger economic backdrop continues to develop, consumers are becoming more confident in both their own financial situation, and the country’s. And while political uncertainty looks likely to rise following the general election, household sentiment should be supported by the modest pickup in wage growth that seems to be unfolding. This suggests the UK’s economic prospects remain bright.”
[i] People refers to people surveyed as per Editor’s notes (see full release).
[ii] Previous month’s data has been revised due to an upward revision in estimates of historical rent spend made by the Office for National Statistics, which accounts for circa 12% of essential spend
[iii] Consumer research refers to the Ipsos MORI research referenced in the Editor’s notes (see full release).