Consumers’ confidence in their personal finances has fallen to its lowest level in 30 months, according to the latest Lloyds Bank Spending Power Report.
In the monthly Ipsos MORI survey of over 2,000 bank account holders in the UK, those who said they felt positive about their personal finances in October fell by 3pp, from 64% to 61%. This measure is now at its lowest level since April 2015. A big gap exists amongst different age groups, with 78% of over 65s feeling positive about their personal financial situation, versus just 60% of 18 to 24 year olds and 61% of 25 to 34 year olds. Women (58%) are also significantly less positive than men (64%).
As we approach the festive season, more than one in three (38%) of those surveyed said they are worried about the impact Christmas spending will have on their personal finances. 1 in 8 (13%) of those surveyed plans to cut back spending on essentials to fund their Christmas spending. The number of households reporting their financial situation as comfortable also dropped in October, by 2pp from 62% to 60%. Households with children aged under 18 are far less likely to report their situation as comfortable (54%) than those with no children (63%).
Meanwhile, Lloyds Bank’s analysis of its own customer account data showed that people continue to spend more on essentials. The year-on-year growth in consumers’ essential spend for October was around 2%. This was the 17th consecutive month of year-on-year growth in essential spend. Food, accounting for c.40% of all essential spend, had a year-on-year rise of around 2%, a seventh consecutive month of growth. Fuel spend rose by around 5%, a 14th consecutive month of year-on-year growth.
Gas and electricity spend rose to around 2.5%, from around 1% last month. This is the third consecutive month of spend increase, following over three years of continuous decline.
Robin Bulloch, Managing Director of Lloyds Bank, said “While most people remain positive about their personal finances, last month saw a significant drop off in consumer confidence. Inflation is now at a five-year high and it appears that millennials are feeling the pinch more than most. Therefore it was no surprise to see the Government reaching out to the younger generation in this week’s Budget.
“But regardless of age, as we approach the festive season, our advice to households is manage your finances carefully. With the cost of essentials continuing to rise, avoid spending more than you can afford to on luxury items, and don’t start the New Year with a financial hangover.”