UK consumers are at their most upbeat for nine years on the back of improving job prospects and low inflation, according to the latest report to suggest spending power is recovering.
Consumer confidence rose for the fifth successive quarter in the opening months of this year to hit its highest level since the pre-crisis days of 2006, according to market research company Nielsen. The proportion of people feeling now was a good time to spend was also up; at 45%, it was the highest since comparable records began in late 2006.
“Consumer confidence in the UK continues to rise. The UK is one of the fastest growing major economies, unemployment is falling and people are benefiting from zero inflation and lower prices in supermarkets and petrol stations,” said Nielsen UK managing director Steve Smith.
Against the backdrop of falling unemployment and a modest pick up in wage growth, the survey of more than 500 people in the UK found the proportion feeling positive about their job prospects increased for the eighth consecutive quarter to 45% – the highest level for more than seven years.
Although the UK exited recession in 2009 and recorded the strongest economic growth among advanced economies last year, more than half of those surveyed believed the UK was still in a recession in the first quarter of 2015. But at 51%, the proportion was the lowest since the question first appeared in the survey, seven years ago.
The generally upbeat tone of the survey echoes a separate report from business group CBI suggesting British retailers enjoyed a jump in sales this month and were at their most optimistic for 27 years about future trading.
The CBI’s snapshot of the high street in May signalled that sales volumes grew faster than City analysts and retailers themselves had been expecting in May.
Its survey of 134 companies in retail, wholesale and motor trading showed a net balance of 51% said sales volumes were up on a year ago. That was the highest reading since December and up sharply from a balance of 12% in April and beat expectations for a reading of 17% in a Reuters poll of economists.
Asked about their expectations for June, a net balance of 58% expected sales volumes to grow again, the strongest reading since September 1988 and well above 40% in last month’s survey.
The CBI’s director of economics, Rain Newton-Smith, highlighted the slowing pace of inflation, which fell below zero in April:
Retailers will be encouraged to see growth in sales and orders on the high street bounding ahead. Low inflation, which we expect to remain below 1% for the rest of the year, has given household incomes a much-needed boost and greater spending power.
Economists said it appeared for now that the UK was experiencing “good” deflation that was boosting spending, rather than prompting people to put off purchases in the hope of lower prices in the future.
The boost to household finances from low inflation is also flagged up on Wednesday by supermarket Asda, which found the average UK household had £187 for discretionary spending in April 2015, an extra £17 a week compared with a year earlier.
Its income tracker showed air fares were a big factor, down 5.3% on the year. and that the typical basket of food and non-alcoholic drink was 2.8% cheaper.
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