As we approach the long summer holidays and MPs are returning to their constituencies, it is worth considering how the consumer situation has changed in the last 12 months. At the macro-level, there is good news: GDP growth has outperformed consensus expectations since last summer and forecasts have been revised up significantly for the year ahead. But it is also clear that we still have some way to go to ensure that all consumers can look forward to sustained increases in their living standards.
This time last year, unemployment stood at close to 8% and Mark Carney had just taken the reins at the Bank of England. In August the Governor announced the Bank's policy of forward guidance, that - subject to certain conditions - the base rate of interest would not rise until unemployment fell below 7%. The expectation was that this would take the creation of 750,000 jobs and three years of slow recovery for this to happen. Less than a year later unemployment now stands at 6.6%, but the base rate hasn't changed.
Unsurprisingly, this stronger macroeconomic position is also being reflected in consumers' expectations about the economy. This time last year, just one in four consumers felt that the UK economy would improve over the next year. The most recent Which? Consumer Insight Tracking data show that well over one in three (37%) now expect that to be the case.
This renewed confidence and optimism in the economy has not yet filtered through to consumers' views of their own finances, which have remained flat over the last year, however it is being reflected in other ways. Our data show that many specific consumer worries have fallen in the last year and that consumer spending behaviour has changed. Here, our tracking data echoes the ONS's Consumer Trends data, showing that consumers are less likely to be cutting back compared to last year and are now more confident about spending on non-essentials.
In short, MPs are likely to be returning to happier, more confident consumers than this time last year. But, that is not to say that concerns about living standards have disappeared. While many more consumers are feeling confident about the future, the majority are still pessimistic. There are also distinct variations between different groups.
One of the most obvious differences is between home-owners and private renters. Given the demographic make-up of these two groups (home-owners are, on average, older and more affluent) and currently low mortgage rates, it is unsurprising that home-owners are feeling more positive about their household finances. Nearly half of home owners feel that their current finances are good, for private renters, the figure is below one in three (although it has risen slightly in the last year).
However, perhaps more interesting, is that this situation is reversed when we look at confidence in the future. Likely driven by ongoing uncertainty over the timing and scale of future interest rate rises and the impacts on mortgage rates, just one in four home-owners believe that their household finances will improve in the next year, while over a third of private renters feel that will be the case.
More broadly we also see distinct differences between households at different points in the income distribution and in different parts of the UK.
They key thing here is that, as ever, the consumer experience of the economic recovery is a mixed one. That means that MPs are likely to continue to see some very worried constituents this summer.