- Attitudes towards the current financial situation fall as perceptions about people’s personal financial situation and Britain’s employment situation both drop
- However, July saw falls in year on year essential spending, with a continuing decline in water bills
- Ahead of the new school year, the average intended spend in preparing children and extracurricular activities is £335 on 4 to 10 year olds and £315 on 11 to 18 year olds
The latest Lloyds Bank Spending Power Report shows a fall in sentiment towards people’s current financial situations in July. Following last month’s improvement and record high of 164, the Overall Index has fallen by three points, driven by falling confidence towards people’s personal financial situation and Britain’s employment situation.
Contrary to the upward trend observed over the previous two months, in July sentiment towards the country's financial situation dropped by 5 percentage points (-5pp), peoples’ personal financial situation dropped by 3pp, the country’s employment situation dropped by 2pp and sentiment towards the country’s housing market saw the biggest fall by 9pp.
However, despite a decline in sentiment in July, Lloyds Banking Group economic data shows continuing falls in essential spending compared to the same time last year. The negative growth in essential spend stood at -1.1% in July, slightly higher than June (-1.2%). The slowing of falling spend on fuel which had been seen over recent months has started to pick up again (-7.2%), and falls in water bills (-1.2%) last month have continued.
In addition to this, the consumer research shows people who think they will have more money in six months’ time has increased from 17% in May, to 19% in June and now stands at 21% in July, reflecting a more stable Future Situation Index which remains unchanged this month.
Spending power for different consumers
Empty nesters in particular express less confidence this month in the country’s financial situation (down 10 points), their personal financial situation (down 10 points) and the UK housing market (down 18 points). At the same time, young singles feel significantly better about their personal financial situation (up 28 points), the country’s employment situation (up 32 points) and current levels of inflation (up 14 points).
Claire Garrod, Head of Personal Current Accounts at Lloyds Bank, said: “Spending power confidence dropped back in July but it may be no surprise to see current spending power pausing for breath. The summer can be an expensive time of the year with people putting money towards paying off holidays and many families facing significant sums to get their children ready to go back to school in the next few weeks.”
The cost of preparing children for the new school year
With the end of the summer holidays quickly approaching, parents’ thoughts will be turning towards preparing their children for their return to school and the costs associated with this, at what can be an expensive time of the year. The consumer research shows that the average intended spend in preparing children for school and extracurricular activities is £335 on each four to ten year old and £315 on each 11 to 18 year old.
For those children aged between four and ten, this spend is made up of £181 on preparing them for school with items such as uniforms, coats, school shoes, PE kit, stationery and text books, and £153 on extracurricular clubs, classes and lessons. For those aged between and 11 and 18, these figures are slightly lower at £167 and £147 respectively.
To prepare children aged between four and ten for school, those aged between 35 and 44 expect to spend £213, which is 25% more than those aged between 18 and 34 (£170) and 88% more than those aged between 45 and 54 (£113). This is also reflected in the spend on older children, with those aged between 35 and 44 intending to spend £199 on each child, 31% more than those aged between 18 and 34 (£152) and 43% more than those aged between 45 and 54 (£139).
Patrick Foley, Chief Economist at Lloyds Bank, said: “Sentiment among households remains positive overall, but the recent dip in employment and some easing in the pace of wage growth may have weighed on confidence slightly this month. Nevertheless, a stable view of future prospects suggests consumer spending should continue to underpin the UK’s recovery”.