Consumers believe inflation will rise beyond 3%

Consumers are increasingly optimistic about the UK’s job market but see inflation soaring, according to the latest consumer confidence survey.

The latest consumer barometer from Lloyds TSB Corporate Markets found in March the balance of consumers who reported employment prospects being generally better now than 12 months ago rose two per cent to -27 per cent.

This reflects official labour market data released this month, which shows unemployment continued to fall and employment was at a record high.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “The labour market has so far defied expectations, with official data showing falling unemployment and employment at a record high.

“Our survey shows that consumers are beginning to acknowledge this and, when people feel the job market is good, they continue to spend even though prices remain high. This can only be good news for the outlook of the economy.”

Consumers are more pessimistic on inflation, however, estimating CPI to be 3.3 per cent next year, up from 3.2 per cent in February’s survey.

The survey found 84 per cent of respondents expected prices to rise rather than fall in 12 months’ time, and 80 per cent reported prices are higher now than a year ago.

Consumers also increasingly see further interest rate cuts as unlikely, with nine per cent more predicting interest rates will be higher rather than lower in 12 months time.