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Households increasingly positive on the economy

Cherry Reynard
Written By:
Cherry Reynard
Posted:
Updated:
03/12/2014

Confidence in the economy is growing increasingly positive across all household types, according to the latest Lloyds Bank Family Finances report.

Although people still feel negative overall, the balance of opinion on the country’s financial situation has grown more positive since the last autumn statement – from -54% to -35%.

Lloyds Bank says that this is largely attributable to improving economic growth. In the third quarter of 2014, GDP grew by 0.7% on the previous quarter, while inflation (as measured by the CPI index) has remained below 2% for the whole of 2014 and now sits at 1.2%.

The number of people out of work reduced by 510,000 in the 12 months to September 2014 with unemployment falling by 115,000 to 1.96 million in the three months to the end of September. In addition, the 12 months to October 2014 saw average house prices increase by over £14,000, giving people more equity in their homes.

Households without children are significantly more positive about their household financial situation than those with children, with a 16% balance of opinion, doubling in positivity from 8% in October 2013. Nevertheless, those households with children are becoming more positive with a 13% increase year on year.

Philip Robinson, Savings Director for Lloyds Bank said; “Families are still feeling the pinch with spending on bills continuing to take up most of their household income. Improvements in the wider economy have not yet taken the pressure off household finances but these improvements are having some effect, with families thinking they’ll have more disposable income in six months’ time.”

Despite financial positivity improving for families, overall sentiment towards their financial situation is still not positive. Seven in ten households with children spend at least three quarters of their income on bills and essentials. One in five, (20%) spend all of their income each month.

Compared to last year, many households feel they’re spending more on basic essentials. Half (50%) said they’re spending more this year on utility bills, over a third (37%) said they are spending more on water, 44% for petrol and 46% for groceries. 60% of those with children spend £250 a month or more on groceries, whereas only 35% of those without children spend the same amount.
In addition to spending more on essentials, many people also believe they’re spending less on leisure items (42%) and clothes (34%) when compared to last year.
Just under a third (32%) of families didn’t save any money in the last year, up 2% on the year before. Meanwhile, looking more broadly across the nation, half the population (50%) have less than two months’ income in savings, which, based on average UK full time earnings, is less than £4,308. This figure includes 35% of people who have less than one months’ income (£2,154) saved. Only 20%% of the population have more than four months’ of income in savings, which equates to savings in excess of £8,616, based on the average full time salary.