The new wave of lockdown restrictions in late 2020 and early 2021 inevitably had a harmful impact on the economy. Consumer expenditure fell by 3.9% in the first quarter of 2021 compared to Q4 2020, mainly because of the hit to spending on non-essential retail, hospitality and transport. This contributed to a 1.5% quarterly fall in economic output, leaving GDP 8.7% below the last COVID-free quarter in Q4 2019.

In contrast to the fall in economic activity, consumers’ reported financial wellbeing and confidence have continued to strengthen since we last reported data from January 2021 in the February edition of this Report. This has been particularly notable in the last couple of months, with current financial wellbeing and financial confidence for the year ahead both hitting index highs in April.

The successful vaccine rollout has been a key factor in the growing positivity in recent months. This, coupled with the announcement of – and adherence to – the government’s roadmap out of lockdown has given consumers belief that the end of the COVID-19 crisis is in sight. With this comes growing confidence that jobs will be secure, allowing people to think about the future with more clarity than they have been able to since the start of the pandemic.

Of course, the rise of the Indian variant of COVID-19 has served to remind us that the outbreak is far from over and threatens to derail the final easing of restrictions in June. However, for now, consumers are looking ahead with optimism.

Financial activity remains significantly below pre-pandemic levels but has risen sharply in the last three months. Part of this increase reflects increased holiday bookings from consumers boosted by vaccines and the easing of travel restrictions.

Mostly, though, it has been a result of another period of elevated savings activity. 53% of people say they added to their savings in the three months to May, while Bank of England data shows that household balances grew by £53.2 billion in the first three months of the year.

As with the surges in saving we have seen throughout the pandemic, this is a direct consequence of reduced spending opportunities leaving consumers with little else to do with their cash. However, the lifting of lockdown rules and reopening of swathes of the consumer-facing economy mean this is set to change in the coming months. Plans to buy clothes, eat out and attend events have all increased in the last three months, with consumers expected to start to spend some of the additional savings made over the last year or so.