Spending power confidence drops in July
The latest Lloyds Bank Spending Power Report shows a fall in sentiment towards people’s current financial situations in July. June’s Overall Index figure of 164 represented both an improvement on May, and an all-time high.
Now, the Index has fallen by three points, driven by falling confidence in respect of personal financial situations and the wider UK employment situation.
In July, sentiment towards the country’s financial situation dropped by 5 percentage points (-5pp), personal financial situations by 3pp, the country’s employment situation by 2pp and the country’s housing market by 9pp.
However, despite the decline, 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 per cent in July, slightly higher than June (-1.2 per cent). Falling spend on fuel, seen over recent months, has started to increase again (-7.2 per cent). Falls in water bills (-1.2 per cent) last month have continued.
People who think they will have more money in six months’ time has increased from 17 per cent in May, to 19 per cent in June and now stands at 21 per cent in July, reflecting a more stable Future Situation Index which remains unchanged this month.
Spending power for different consumers
Parents whose children have grown up and left home expressed 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).
Simultaneously, young singles felt 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).
The new school year
With the end of summer approaching, parents’ thoughts will be turning towards their children’s return to school, and associated costs. The findings suggest 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, 25 per cent more than those aged between 18 and 34 (£170) and 88 per cent 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 per cent more than those aged between 18 and 34 (£152) and 43 per cent 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.”
Claire Garrod, head of personal current accounts at Lloyds Bank, said: “Spending power confidence dropped 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.”