The biggest rise in positive sentiment was in household disposable income

The biggest rise in positive sentiment was in household disposable income

Consumer confidence is at its highest level for three years in the UK, according to new figures, driven by improving sentiment on levels of income and debt.

Findings from Deloitte's recent Consumer Tracker, which monitors consumer confidence and spending habits, found that overall confidence is three percentage points higher than a year ago and 13 points higher than when the tracker began in the third quarter of 2011.

The biggest rise in positive sentiment was in household disposable income, which improved by 7 points year-on-year (from -25% in Q3 2013 to -18% in Q3 2014). Spending on essential items, however, declined for the third successive quarter.

Ian Stewart, chief economist at Deloitte, said: "Even without growth in real incomes, consumer confidence has continued to rise. Lower oil prices and commodity prices and a strengthening pound have led to a sharp decline in inflation. An improving jobs market and lower inflation have been a real tonic for UK consumers. With inflation on a declining path and earnings heading up, the scene is set for a recovery in real incomes around the turn of the year."

According to Deloitte, a strong job market has also boosted confidence, with fewer consumers suffering a reduction or loss of income in the third quarter compared to last year (down from 12% in Q3 2013 to 11% in Q3 2014).

This confidence appears to be long term, with 20% of consumers expecting an increase in their income in 2015, compared to just 11% who expect a decrease, the report found.

Ben Perkins, head of consumer business research, added: "Looking ahead to 2015, consumers appear in positive mood as they expect the value of their properties to continue to rise and their levels of debt to fall. The decline in the amount spent on essentials like food and utility bills is also expected to continue. However, with the prospect of higher interest rates, along with a cooling housing market, there are still concerns on the horizon."