Consumer spending grew at its fastest monthly rate since May 2009 last month, as jobs prospects improved and the outlook for disposable income levels looked decidedly brighter.
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The findings of Visa Europe’s UK expenditure index revealed that UK household spending increased by 3% month on month, representing the highest monthly growth figure for nearly three-and-a-half years.
This is also an improvement on the consumer spending figure of 1.2% in recorded in August.
The boost to consumer spending levels has been attributed to a number of factors, including lower inflation, rising employment and an improved outlook for income levels.
Predictions from the Centre for Economics and Business Research (CEBR) outline that income levels for all groups are likely to take an upward turn in 2013, as the UK’s economy makes a 0.5% lift out of the current double-dip recession.
The lowest income groups are forecasted to see a 1.5% increase in real income, while this will stand at 1% for middle income households and 0.7% for those in the highest income brackets. This is expected to drive up retail sales volumes by 2.5%.
Chris Williamson, chief economist at Markit, which compiled the report for Visa, argues that while consumer spending is set to continue to rise, low consumer confidence will continue to be a stumbling block.
“Going forward, it seems likely that consumer spending will help boost the economy to a greater extent than it has done over the past two years, due to recent improvements in disposable incomes, lower inflation and rising employment,” he said.
“However, consumer confidence remains historically low as uncertainty about the economy and job security persists, suggesting that the bounce in spending seen in the third quarter could be as good as it gets for the foreseeable future.”
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