CONSUMER confidence towards the economy has lifted to its strongest levels in over three years, with the majority of people now expecting to be better off in the coming months, a report has found.

Lloyds Bank's Spending Power report said confidence lifted by six points in January to reach a new all-time high of 129 points for the monthly survey.

The report, which surveyed more than 2000 people across the UK last month, said the balance of opinion about their future level of discretionary income was at its most positive since records began.

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A net balance of 2% of people think they will have more money to spend in six months time rather than less. The balance of people who are positive about the current state of their personal finances is also the strongest since the survey began, with 57% saying their situation is excellent, very good or somewhat good.

But Lloyds said that instead of choosing to spend, people appear more inclined towards saving more and paying down debt. The balance of people planning to shave off more of their debts in the coming months rather than less rose to 11% in January.

Meanwhile, 14% of people expect to squirrel more money away rather than less in the future.

While feelings about the UK's economic situation have improved strongly over the last year, spending on gas and electricity bills is still "growing rapidly" at about 6% on a year ago, the report said. Gas and electricity bills remain a source of inflation concern for more than three-quarters (77%) of consumers.