Spending on the climb after optimism remains at its highest for two years

Consumer sentiment is continuing at its highest level in two years, a new report says.

Greater optimism towards the current economic situation is the key driver of improved sentiment, according to the Lloyds TSB Spending Power Report.

Spending on essential items is still growing at around 2 per cent, broadly in line with inflation, meaning the squeeze on spending power for non-essential spending has eased since last year.

Patrick Foley, chief economist at Lloyds TSB, said: "The recent reports of a return to growth for the UK economy are being reflected in improved consumer sentiment, which is good news as better confidence will help to sustain the economic recovery."

People still feel they will have less money in the future to spend after household bills and essentials have been paid, but the balance has slightly improved.

The most optimistic about future saving are those between 16 and 24 years old while the most pessimistic are those over the age of 55, the report says.