“People are finally starting to feel the benefit of the recovery in their pay packets. After five years, average wages are finally increasing more quickly than prices. Although this will take time to feed through into consumer confidence, there are signs that spending habits are changing.
People are making more use of credit, for example, showing that they’re confident enough to bring forward spending in the expectation of future pay rises. And Mintel’s research showed an increase in planned financial activity in January, particularly when it comes to big-ticket purchases such as holidays and home improvements.”
– Toby Clark, Director of Research, EMEA

An end to the income squeeze, but people are still wary

  • Average wages have finally started to increase more quickly than prices, boosting consumer spending power after years of gradually falling real wages.

  • It will take time for this to feed through into consumer confidence, though, and this is reflected in Mintel’s data.

  • People’s assessment of their financial wellbeing has barely changed since the start of the year. As many people say that their finances have deteriorated over the last year as said that they are better off.

  • There’s still a sizeable gap between sentiment among higher and lower earners. The better off are enjoying the best of the recovery, and are increasingly confident about the future. This bodes well for overall levels of consumer spending, especially at the upper end of the market.

  • Planned financial activity was up in January. People were particularly likely to be thinking of booking a holiday or spending money on their home. Both are relatively big-ticket purchases that traditionally do well as economic growth picks up.

Millennials are leading confidence upwards

  • Millennials, objectively, have had a tough time during and since the recession. Graduates are having to contend with high levels of debt, youth unemployment is high, and even those who are in work are having to accept lower salaries than they might have expected before the financial crisis.

  • Mintel’s data, though, shows that millennials are making the best of a tough situation. They’re the most optimistic about their financial prospects, they’re the most likely to report improving finances, and they’re more likely than most to say that their current situation is pretty healthy.

  • This feeds through into their expected financial activity. Much of the activity is a reflection of their stage of life. Many haven’t yet started a family, and socialising is high up the list of priorities. Others are setting up their first home, so are planning to buy white goods, furniture and other home improvements.

Key economic indicators

Figure 1: Key economic indicators, January 2015
Indicator Period Value
Annual GDP growth Year to Q3 2014 +2.6%
Unemployment rate November 2014 5.8%
CPI December 2014 0.5%
Annual change in average weekly earnings (including bonuses) November 2014 +1.7%
Bank of England Base Rate January 2015 0.5%
Annual change in house prices (Land Registry) November 2014 +10.0%
Source: Office for National Statistics, Bank of England, Land Registry
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