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Shoppers still cautious despite being better off

Shoppers in the UK are reluctant to spend despite having an average of 25% more disposable income each month.

According to Ernst & Young’s Annual Discretionary Income Study, household discretionary income has risen dramatically over the last twelve months. Households have an average of £200 a month extra to spend than last year thanks to lower mortgage payments and the fall in the cost of utilities, the report says.

However, the report finds that many consumers are saving the extra cash or paying off debts and credit cards rather than spending it on the high street, as sharp house price declines have significantly eroded their overall wealth.

Ernst & Young retail director Jason Gordon said: “Even though we’re still in recession, many UK householders who have not been hit by unemployment have experienced a dramatic upturn in their monthly budgets over the last year.”

“In addition, alongside falling house prices, the bleak economic climate and fears of job losses have had a devastating impact on consumer confidence. Consequently, many consumers are using their increased monthly spending power to repair savings balances and pay off credit cards and other debts.  These gains are certainly not being spent freely on the high street.”    

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