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Britain’s discretionary spending 'hits three-year high'

Jan 28
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Britain’s discretionary spending 'hits three-year...

An improving labour market and falling prices for essentials have contributed to Britain’s discretionary spending reaching a three-year high, according to a new report.

The 2014 Deloitte Consumer Tracker has revealed that overall consumer confidence is three points higher for the year compared to 2013, while falling inflation and a stronger labour market means the public have more money in their pockets.

Disposable income has remained stable for the third consecutive quarter and is nine points higher versus that achieved in the same period of 2013, which is helping to underpin consumer confidence.

Another factor that has contributed to the positive sentiment is that fewer people experienced a reduction of a loss of income and more received a pay rise or bonus compared to the last three months of 2013.  

The finances of consumers have also been boosted by the lowest rate of inflation in 14 years, with prices falling for food, energy and petrol, meaning the cost of essentials dropped, freeing up more disposable income for discretionary and big ticket purchases.

Ben Perkins, head of consumer business research at Deloitte, explained: "Lower inflation and higher wages are having a pronounced effect on consumer spending behaviours.

"Categories such as hotels and restaurants or consumer technology have really benefited from consumers feeling less of a squeeze on their disposable income. In comparison, net spending on utilities and groceries is growing more slowly than consumer spending overall, a reflection of falling fuel prices at the pump and the grocery sector's intense price competitions."

While long-term consumer confidence has risen, short-term uncertainties have rocked the boat. In the fourth quarter of 2014, sentiment actually dropped three points compared to the prior three months, reflecting worries about health and wellbeing and job security.

Ian Stewart, chief economist at Deloitte, explained that continued uncertainties are affecting consumers' wider perceptions of their welfare, which echoes the results of the latest Chief Financial Officers (CFOs) Survey.

The other report shows that CFOs are upbeat about the UK's economy, but external factors, such as the next general elections and troubles overseas, have dampened their overall confidence.  

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