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Find free, independent and practical advice about caring for older people across the UK
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The Which? Consumer Insight Tracker shows six months of increased consumer optimism towards the future of the economy. However, optimism about household finances has not kept up pace, and the cost of essentials are still a major consumer concern.
..twice as likely to be optimistic about the economy's future
Income and attitude to the economy
People on the highest incomes are twice as likely to be optimistic about the future of the economy than those on the lowest incomes
While 50% of people on the highest incomes expect the economy to improve in the next year, just 31% of those on the lowest incomes agree.
At the moment, people on the lowest incomes are more than one and half times as likely to be financially squeezed as those on the highest incomes and two thirds say they would find it difficult to cope with an unexpected expense. While two fifths of households on low incomes (42%) are feeling financially squeezed, just 27% of those on the highest incomes are.
How many people are cutting back spending on essentials?
Throughout 2013, the top consumer concerns were energy, fuel and food prices – and they remain top at the start of this year, but with greater optimism about the economy and forecasts suggesting rising real wages for the first time since 2009 does this mean that the cost of living will become less of a concern for consumers?
Consumer spending power fell year on year for the second half of 2013, due to above trend inflation and low wage growth, but now that inflation has fallen to government target and wages look like they may be on the rise we may see a reverse of this trend. But we cannot ignore that the main concerns, and main drivers of falling spending power, have been high essential costs (like energy and housing). This rising pressure from non-discretionary spend does not look like ending, as consumers are also being asked to contribute to investment in essential markets such as telecoms, energy and water.
The recent National Infrastructure Plan outlined investments currently penciled into the infrastructure pipeline and showed the proportion expected to be funded through consumers’ bills. A conservative calculation shows that this could amount to increased costs of £740 per household per year up to 2020. So even if incomes pick up in 2014, while the cost of essentials remains high then living standards must remain forefront of the political agenda.
Top consumer worries
How many people think the UK economy will get better in the next year?
Many consumers benefited from a more positive outlook as the economy grew during 2013. But at the same time others still struggle with the rising cost of living. There is a divide between men and women’s experience of the current economic climate. 42% of men expect the economy to get better in the next year, compared to 33% of women.
These divides – by gender, income and age - risk parts of the population benefiting from economic growth and able to spend, while others remain stuck in the cost of living crisis as essential costs take up a greater proportion of their incomes.
Consumers are slightly more optimistic about the economy, up from 36% in Jan 14 to 38%. While a smaller proportion feel that their finances will get worse, compared to Jan 14, the proportion of consumers that think their personal household finances will improve has remained flat at 28%.