Verum analysis of UK spending on motor fuels
The latest Verum Household Discretionary Spending Tracker, calculated by subtracting essential living costs from total household spending, revealed an 8.7 per cent year-on-year increase in UK household discretionary spending during quarter three of 2014. The most significant trend was the increased spending on petrol and diesel.
Between July 2008 and the first quarter of 2014, UK household spending on motor fuel mirrored changes in the price of fuel. Despite changes in price, the volume of fuel that households bought remained virtually unchanged. Hence, when pump prices rose, spending on motor fuel rose. When pump prices fell, spending on motor fuel fell.
This relationship appeared to change in quarter two of 2014. Pump prices fell by less than one per cent, but household spending on motor fuels increased by more than six per cent. Between quarters one and three of 2014, pump prices fell by almost six per cent, while household spending on fuel increased by nearly 11 per cent.
Robert Macnab, director of research at Verum, said: “It is not the increase in fuel spending itself that is significant, rather what it represents. Families are doing more miles and they are travelling to spend. If this behaviour spreads, it will have a positive effect on the UK economy.
“Some economists and investors have voiced concerns that the recent oil price falls mean that global demand may be weakening. However, this latest UK data suggests that lower fuel prices are stimulating an increase in spending, particularly among households.”