Consumers’ confidence in their financial situation is at its most positive level in over three years, prompting predictions that people will become more willing to splash out on luxuries in the coming months, a report has found.
Lloyds Bank’s spending power report said its measure of consumer sentiment reached 136 points in March, which is a new series high since records began in November 2010, as more people start to feel in control of their money as the pressure on their wallets falls back and they find themselves in a better position to pay off their debt.
An overall balance of 5% more people think they will have more money to spend on discretionary items in the next six months rather than fewer, up from a 2% balance in February and minus 9% a year ago.
People living in the North East have the most positive net balance of opinion for future discretionary income at 13%, followed by those living in London at 12%.
Patrick Foley, chief economist at Lloyds Bank, said the wider improvements in the economy were likely to spur more people on to spend on non-essential items.
He added: “As pressure on consumer wallets from essential spending continues to ease, both the willingness and capacity to undertake discretionary spending is likely to rise in the months ahead.”
The report found that annual growth in consumer spending on gas and electricity bills has slowed to 3%, while food spending has also eased and spending on fuel is around 4% lower than it was a year ago.
It also suggested that as living costs ease, people are becoming more confident about being able to clear their debts, with an overall balance of 9% of people feeling positive about paying off what they owe in the future, which is up by three percentage points on February.
The findings come after the Office for National Statistics said last week that the Consumer Prices Index rate of inflation dropped to a four-year low of 1.6% in March.
Lloyds found that households’ sentiment towards the housing market and employment is continuing to improve.
The balance of people who think the employment situation is good or excellent versus those who are downbeat rose by five percentage points.