A new report from global information and insights company, TransUnion, shows that consumers are more optimistic about the likely state of their finances over the next 12 months than at any point over the past two and a half years. 

The latest survey, released as part of TransUnion’s Q2 2024 Consumer Pulse report, finds that 43% of consumers are optimistic about their household finances in the next 12 months. This shows a continued rebound in confidence and is the highest level of optimism TransUnion has recorded since Q4 2021 (48%). 

James Robinson, managing director of consumer interactive at TransUnion in the UK, said: “As inflation hits the Bank of England's target of 2% for the first time in almost three years, there are signs of hope among consumers that the coming year will bring an easing of financial pressures. But the cost-of-living stresses that built up in recent years won’t be disappearing right away and that legacy will affect some households more severely than others, meaning we’re seeing a complex, divided picture of recovery.” 

Consumer optimism is not being felt equally across the board, with a steep generational divide both in terms of actual financial health and consumer sentiment. Bucking the overall trend, 73% of Gen X were not optimistic about their household finances in the next 12 months.   

This divide might be explained by reported differences in income growth; 37% of Millennials said their household incomes were keeping up with the rate of inflation, the highest of any generation – this is opposed to only 15% of Gen X, the lowest of any generation. 

These attitudes reflect ONS figures suggesting any real-terms income gains are marginal. With wage growth slightly above current inflation levels at 2.3% year-over-year (YoY) as of April 2024,i financial stresses persist in the present for many, even considering growing optimism. 

Meanwhile, housing (mortgage and rent costs) ranked amongst the top concerns affecting consumer household finances in the next six months for all generations except Baby Boomers. In fact, 68% of Gen Z ranked housing costs in their top three financial concerns, along with a majority of Millennials and Gen X. 

The impact of rental costs looks to be landing squarely on low earners, who are significantly more likely to be tenants.ii As such, it‘s important not to overlook signs of financial vulnerability, even as the macro picture suggests hope for the future. 

Against this backdrop, optimism is yet to translate to spending for many consumers. Nearly half (47%) of respondents plan to decrease spending on discretionary items like dining out, travel, entertainment, while more than a third won’t spend as much on large purchases like appliances and cars (38%), or retail purchases like clothing, electronics or durable goods (36%) in the next three months.