- Confidence drops back in April compared to March, but still remains at near record levels
- People are still spending less on gas and electricity (-6.7%) and fuel (-8.8%), compared to 12 months earlier
- Those planning to go on holiday this summer expect to spend £1,345 on average, but over a quarter (27%) are not planning on going away at all
The latest Lloyds Bank Spending Power Report shows the overall confidence of people surveyed took a step backwards last month after seeing an upward trend throughout the rest of 2015 so far, resulting in the Overall Index dropping back three points to 155 [Chart 1].
People’s[i] feelings towards both their current and future financial situations levelled off during April, with uncertainty in the run up to the General Election potentially restraining confidence towards personal finances (down 1 percentage point (pp)), household finances (down 1 pp) and the country's finances (down 5 pp).
Lloyds Banking Group economic data shows that April once again saw a fall in essential spending of -0.8% overall[ii], with growth continuing to be held down by lower spend on gas and electricity (-6.7%) and fuel (-8.8%), compared to 12 months earlier. However, the research[iii] shows that more than one in ten people surveyed in April (13%) felt that they spent more on going out and treating themselves than they did a year ago; a 2 pp increase compared to March. This was particularly the case amongst those aged 55 and over (a 4 pp increase compared to March).
Patrick Foley, Chief Economist at Lloyds Bank, said: “Households retain a positive view of their financial situation, as a pickup in wage growth and muted inflationary pressures combine to strengthen real incomes. A more cautious assessment of future prospects continues to prevail, however. But against a backdrop of improving labour market conditions, and the lifting of some near term uncertainty following the election, a solid pace of growth seems likely to unfold this year.”
April saw the Future Situation Index drop for the first time this year, taking it to 108, with the uncertainty in the run up to the General Election possibly dampening down the outlook. Anticipated future spending remains stable, with around two thirds (65%) stating they do not expect their spending habits to be different in six month’s time.
However, with summer approaching, many people are already looking at the ways in which they can get the best deals on their holidays over the coming months. The consumer research[iv] shows that the average amount people will spend on their summer holiday this year is £1,345. Families[v] with children will, on average, spend around £400 morethan those without (£1,610 vs. £1,212).
When compared to other age groups, 18 to 34 year olds are the most likely to be proactive in finding ways to fund their summer holidays. They are the most likely to shop around online to get the best deals, with over a third (36%) doing so, compared to 31% overall.
Also, 18 to 34 year olds are more likely to make cutbacks to spending, or save more throughout the year to fund their summer holidays, with almost a quarter doing this (22% vs. 16% of 35 to 54 year olds and 11% of those aged 55 and over), and the most likely to start saving early on in the year specifically for their holidays (24% vs. 18% of 35 to 54 year olds and 19% of those aged 55 and over).
Over a quarter (27%) of people surveyed said they were not planning on having a summer holiday in 2015. Over a third (36%) of those planning to take a holiday think that they will spend between £1 and £1000 on their summer holidays and at the other end of the scale, 5% of respondents think their holiday will cost more than £4,000.
Claire Garrod, Head of Personal Current Accounts at Lloyds Bank, said: “Spending power paused for breath in April with the political uncertainty in the UK seeming to impact financial confidence, which dropped back compared to March. However, despite this backwards step, confidence remains at a very high level and has been on an upward trend in 2015.
“Attention has now turned to summer spending and the best ways to finance summer holidays, with many people already shopping around online for the best deals and saving up to meet the costs, which are now £1,345 on average.”
[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)
[iv] As above
[v] Families refers to people surveyed who have one or more 0-18 year olds living at home