Whilst we are still finding time for food we are cutting back on spending elsewhere as consumer confidence has dropped to its lowest point since May, with people citing job security as their main concern.
The latest Lloyds Bank “Spending Power Report” for August showed a second consecutive monthly fall in sentiment towards people’s current situation largely influenced by continued declines in confidence towards the country’s employment situation.
According to the latest ONS labour market statistics, overall unemployment increased by 10,000 during the quarter ending in July.
Among those surveyed sentiment towards people’s personal financial situation and own job security both dropped this month. However, sentiment towards the country’s financial situation and the UK housing market have both seen improvements on last month respectively.
The latest Lloyds Banking Group economic data shows that year-on-year essential spending fell at a slower rate in August down one per cent than it did in July down 1.1 per cent. This was driven by an increase in spend on food and drink in August which accounts for around 40 per cent of each person’s essential outgoings.
Despite this, there were further reductions in year-on-year spending on fuel and water bills contributing to people’s essential spending being one per cent lower than 12 months earlier.
Claire Garrod, head of personal current accounts at Lloyds Bank, said: “Spending power confidence took a step back for a second consecutive month in August, wiping out the improved sentiment that had built since May.
“However, levels of essential spending are still lower than they were a year ago, which suggests this blip in confidence may just be a mid-summer slow-down during the holiday season.”
Patrick Foley, chief economist at Lloyds Bank, added: “Households remain in a generally positive frame of mind, even though a slightly less upbeat view of the employment situation has developed recently. With confidence around prospects for discretionary income remaining relatively firm, this bodes well for the recovery making further progress in the months ahead.”
The survey came as the Centre for Economics and Business Research said that the Bank of England won’t raise interest rates until the middle of 2016. It had previously forecasted a February rate rise but said concerns about the global economy would delay the change.
It expects the UK economy to grow by 2.5 per cent this year, slowing to 2 per cent in 2016 and then average just 1.7 per cent between 2017 and 2020. Household spending, not trade or investment, would account for most of the growth.