Consumer confidence in May increased from nine points to 99, the highest point since November 2005, according to the Nationwide Consumer Confidence Index.
Nationwide says that consumers were upbeat about the economy in May and felt comfortable that things would continue to be good over the coming months.
But the Spending Index fell five points, the only one of the four confidence indices to fall.
Confidence moved most sharply in the week when interest rates increased and Tony Blair announced his departure date from Downing Street: spending sentiment fell sharply while overall confidence rose.
Consumers are also upbeat about the current economic and employment situation, with the Present Situation Index rising 12 points to 101 – the largest recorded rise.
The last time people felt this happy about the current state of the economy was in November 2005 when the pace of economic growth was starting to pick up. People’s views on the current employment situation were a big driver behind the growth in confidence, with six in ten people (60%) believing that there are many jobs available now.
Nationwide’s chief economist Fionnuala Earley says: “Higher interest rates have not affected consumers’ overall confidence, but they do seem to be having an impact on their willingness to spend. The good weather in early May might have helped put consumers in a brighter mood but, people’s spending intentions responded sharply to the latest interest rate announcement; this may offer some comfort to the MPC.”