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Falling inflation hands consumers £80 more a year

by: Ciara Murphy
  • 17/07/2012
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Falling inflation hands consumers £80 more a year
Income growth and falling inflation have boosted consumer spending power for the first time in 12 months.

The latest Lloyds TSB Spending Power Report suggested that consumers have the equivalent of £80 a year, or £7 a month more to spend on discretionary items.

Spending power was 0.7% higher than last year in line with positive income growth, which increased by 0.3%. However, concerns still remain over the state of the economy.

Patrick Foley, chief economist at Lloyds TSB, said: “Although spending power is heading in the right direction it remains far from healthy.”

Growth in essential spending has slowed and reached its lowest level this year at 3.3% after falling in June for the third consecutive month.

This is mainly due to falling debt repayments, which are now 0.6% lower than last year, and also reflects the slowest growth in automotive spending in over two years, which is rising just 1.6% annually now, against a rise of 11% at the start of the year.

Fewer respondents felt that they were spending more on petrol and diesel than this time last year, thus boosting spending power in other areas of the market.

Many more consumers now have money left over after meeting essential outgoings, with this figure increasing by 6% year on year. About half of the population now say they can both meet monthly outgoings and have some money left over.

The remainder, who tend to spend all of their income, include those aged 35-64 who are more likely to have higher financial demands due to mortgages and older children.

However, despite improving circumstances for many, consumers are still feeling negative about the economy. Overall sentiment regarding the country’s financial, employment and housing situation remain predominantly negative, with a small decrease in those believing them to be ‘not at all good.’

On the other hand, concerns about inflation are at a series low. Only 75% of respondents now believe inflation levels are a concern, a drop of 10% since April.

Jatin Patel, director of current accounts at Lloyds TSB said: “We are still a long way from consumers having a huge amount of confidence in the economy, but there are small signs that inflation is one thing they are worrying less about.”

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