Sun and the feel-good factor help to boost confidence in May
The warmest April on record, combined with the feel-good factor of consecutive bank holidays and the Royal Wedding, helped push up the Nationwide Consumer Confidence Index by 11 points in May.
Robert Gardner, Nationwide's chief economist, said: "Despite recording one of the biggest monthly jumps ever, the Index still sits at 55, nine points lower than the same period last year and well below the historical average.
"This month's rise was largely driven by significant increases in the Expectations Index, which rose by 17 points to 76, and the Spending Index, which registered a 16 point rise to 79. But underlying consumer sentiment remains cautious, as shown by a more modest three point increase in the Present Situation Index, which now stands at 23, the same level as May 2010.
"It seems that although consumers are starting to cultivate a more positive view of the future, their current situation remains challenging. The still subdued readings of the Employment and the Future Income Indices reinforce the view that household budgets are still under significant pressure.
"It is also important to remember that the Consumer Confidence Index fell to an all-time low of 40 points in February and recorded figures around the mid 40s during March and April, so consumer confidence still has quite a way to go to recover to the levels recorded 12 months ago.
"It is too early to say whether consumer confidence is in a sustained recovery. There are still strong downward pressures, not least higher than hoped for inflation and continued concern around employment, whilst recent announcements of large domestic energy price hikes are likely to dampen consumer mood.
"We would need to see consumer confidence continue to rise over the coming months, for us to be able to say that the economic recovery is truly being felt by the British public. For this to happen we will probably have to see a real improvement in employment and wages, or a fall in inflation that would help to boost the purchasing power of people's take home pay."
Planned household spending increases for third month in a row
"The Spending Index rose by 16 points to 79 in May, the biggest monthly increase in the history of the Index, but still 19 points down on its May 2010 level of 98. Although there was a slightly bigger rise in the percentage of people who believe that now is a good time to make a major purchase, such as property or a car - there remains a greater proportion of people who believe now is a good time to purchase smaller household items such white or brown goods, at 30% - six percentage points higher than in April.
"In fact the intention to purchase smaller household goods has risen for three months in a row. It is likely that the initial shock of January's VAT rise has died down and more consumers believe it is a good time to buy, aided by various promotions from retailers keen to get their tills ringing again."