Consumer confidence has grown to a record-equalling high according to a new report, largely driven by increases in essential spending.
The Lloyds TSB Spending Power Report for April found that confidence improved during the month amongst consumers, with the Consumer Sentiment Index reaching a record equalling high of 109 points.
Patrick Foley, chief economist at Lloyds TSB, said the growth “has largely been driven by consumer’s perceptions of their current personal finances, suggesting that the squeeze on household finances abated somewhat over recent months.”
Essential spending grew 2.5%, broadly in line with inflation.
Within essential spending, annual growth on food and drink spend – the largest component within the essential spending category – fell to 3.4% from 4.5% in March.
By comparison, annual spending growth on gas and electricity continued to increase in April, rising to 5.7% from 4.7% in March. Annual spending growth on water bills also rose, to 5.5% from 3.9% in March.
However, Foley warns that improved consumer sentiment may not equal an increase in consumer spending power.
He cautioned: “We shouldn’t automatically expect the improvement in sentiment to translate into improved consumer spending, with reductions in some benefit payments, weak wage growth and slowing employment growth likely to be headwinds during 2013.”
Sentiment regarding the employment market remained negative, with 84% of consumers describing it as “not good” or “not good at all” – a broadly stable figure since the beginning of 2013.