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Consumer confidence encouraged by recovery of economy

CONSUMER confidence is continuing to grow in the wake of economic recovery despite low wage rises, two new surveys show.

The Lloyds Bank Spending Power Report for May showed public confidence reaching its highest point since the survey began in 2010, fuelled by falling inflation and rising employment.

And the latest income tracker from supermarket chain Asda revealed family spending power rising for the eighth month in a row in May.

The average UK household now has £171 a week of surplus or "discretionary income" - up £4 a week year-on-year - thanks to an inflationary fall in the cost of food, clothes, mortgage interest payments and plane tickets.

Patrick Foley, chief economist at Lloyds Bank, said: "Positive news about the UK economy continues to accumulate, with firm growth, rising employment and falling inflation all supporting a rise in consumer sentiment. Although wage rises still remain subdued, limited pressure on consumer wallets from spending on essentials bodes well for growth in discretionary spending in the months to come."

Andy Clarke, president and chief executive officer of Asda, added: "As the country sees discretionary income rise for the eighth consecutive month, confidence continues to grow that there is a strong and sustained recovery happening in the UK.

"The rate of essential item inflation is still slowing thanks to a competitive market and family spending power is on the up."

The Lloyds Bank Spending Power Report, which featured the views of more than 2000 consumers, showed limited growth in essential spending - at only around 0.5% higher than a year ago - has helped to ease the pressure on consumers.

There has been a notable fall in energy bills, with average spending around 0.5% lower than a year ago. Spending on petrol also fell sharply.

Overall, the proportion of consumers who feel the country's financial situation is "excellent", "very good" or "somewhat good" is on the increase. However, in Scotland, confidence in the housing market has remained static.

The Asda survey showed an increase in discretionary spending for the eighth consecutive month with food prices declining year on year for the first time since 2006.

Annual inflation on essential items dropped to just 1.3% compared to 1.7% last month and the cost of clothes and mortgage interest payments fell 0.1% and 0.6% respectively.

Travel was also more affordable in May as the cost of plane tickets fell 3.2% compared to a 22% rise between April and May last year.

It was also another record month for the labour market with the fastest rate of employment growth since 1989, with an additional 780,000 people in work.

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