Confidence in the UK economy has dropped for the second month in a row as downbeat economic news starts to dampen spirits, a report on Monday showed.

Optimism about Britain's overall economic health fell to 274 points from May's high of 285 points, with feelings in northern England tending to be the least positive, according to the Lloyds Bank Spending Power Report for July.

After a tide of positive economic news, recent data has been more downbeat, with house prices cooling, the strong pound hammering exports and Britain's trade gap widening to a five-month high in June.

Figures last week also showed that while joblessness is falling, weak wage rises and productivity are continuing to act as a brake on economic growth.

However, overall sentiment towards the UK economic situation was still 33 points higher than this time last year, Lloyds said.

The report also showed that overall consumer confidence rose again, following last month's pause for breath, as consumers felt they had more money in their pockets after paying bills.

Lloyds said overall essential spending fell in July by about 0.5% on a year ago, the first decrease in the history of the Spending Power Report. This was driven by further falls in gas and electricity, food and drink and fuel.

Lloyds Bank chief economist Patrick Foley said: "July's welcome recovery in sentiment comes against a backdrop of continued good news on the economy, most visible in the positive employment outlook.

"However, with official data pointing to continued weakness in wage growth, the easing pressure on household budgets from spending on essentials provides an important support for consumers to undertake discretionary purchases."

PW

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