The economy is rebounding, the housing market is in full swing and wage growth is slowly starting to edge back up, and happily, it would seem that all this positivity is translating into much improved levels of consumer confidence.
In fact, the GfK UK Consumer Confidence Index – a key measure of overall optimism regarding personal finances and the economy at large – has moved to positive territory for the first time in nine years, increasing by one point this month to stand at +1.
It's a significant year-on-year increase too, with the Index having stood at -21 in June 2013, while the last time the Index was in positive territory was in March 2005. Four out of the five measures used to calculate the Index saw increases over the month, suggesting that confidence in the overall economy is slowly edging up.
Nick Moon, of GfK, called the increase a "psychologically important" change, adding that "the next few months will be particularly interesting, since the previous venture into positive territory was merely transitory – two isolated months in January and March 2005. The last time the Index was consistently positive was back in 2002 and this must be the next 'target' from the Government's point of view as we get close to the election period."
However, despite this positivity, it doesn't necessarily mean it's translating into more cash in people's wallets. Additional research from Halifax has revealed that there's actually been little improvement in disposable incomes over the past year, with 44% of those surveyed saying they'd struggle to find an extra £99 a month for bills if their monthly outgoings increased – a marginal drop from the 46% who said the same a year ago.
This has been driven by a rise in essential spending over the last 12 months, with 34% saying they'd spent more money on energy and/or fuel bills than in the previous year, while 23% spent more on food (excluding eating out) and 12% spent more on mortgage or rent payments.
Unsurprisingly it means that key concerns for the year ahead include people's ability to save money for the future (51%), followed by having enough income to cover living costs and bills (44%) and concerns over their ability to make mortgage/rent payments (28%).
But, it's not all bad news. Overall there's been a 60% rise in the percentage of people who expect their financial situation to improve over the next 12 months, with 24% of respondents expecting improvements compared to 15% in 2013. Just 24% expect their situation to get worse, a welcome drop from the 40% who thought the same a year ago.
Anthony Warrington, director of Halifax Current Accounts, says: "We've seen a significant increase in consumer confidence in the last year, despite the fact that economic growth has not yet translated into real improvements in people finances.
"The amount of discretionary income available to people has remained almost unchanged. As such, many people do not have a lot of room for manoeuvre with their finances, so it's important to continue to monitor spending and have contingency plans prepared in case of any unexpected bills."
It's a solid piece of advice for households of all kinds, whether you're noticing renewed levels of disposable income or not, and if you make sure you're prepared for any unexpected bills that could come your way they hopefully won't come as such a shock. Setting up an emergency fund should be at the top of the list, ensuring you've got a valuable financial buffer there should you need it, and if you get into the habit of saving a little each month it won't negatively affect your budget.
As Anthony Warrington concludes, "the economy may be improving generally, but people need to make sure they are protecting themselves from any external financial shocks along the way."
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