The Lloyds TSB Spending Power Report for June found that consumer sentiment stood at 112 points which is some 10 points higher than at the end of 2012 and 22 points higher than the historic low of 90 points seen in March 2011.
Continuing the trend seen in recent months, it is greater optimism towards the UK's current economic situation that is the key driver of improved sentiment in June.
Patrick Foley, chief economist at Lloyds TSB, said: "As the outlook for the UK economy gradually improves, firming consumer confidence remains vital to a self-sustaining recovery.
“More positive sentiment is therefore good news and, supported by greater stability in households' essential spending, should embolden consumers still further.”
At the same time there are positive signs that confidence about the housing market and employment situation is slowly returning albeit rising from subdued levels.
Alongside improving sentiment, households could also take comfort from greater stability in their essential spending.
Annual spending growth on essential items at around 2.5%, has remained fairly constant since the turn of the year and is currently broadly in line with the rate of inflation on those items.
A more stable environment, with fewer unexpected pressures on essential spending, in turn improves household’s capacity for non-essential spending.
Consumer concerns towards the UK's financial situation continues to decrease, with the number of people saying it is ‘not at all good' falling from 41% in May to 39% in June.
On a UK level, this measure has now fallen by 8% since March (47%). Regionally, those living in the North of the UK continue to have the least positive view, with those saying it is ‘not at all good' remaining at 45% for the second consecutive month.
Similarly, the number of those who state the housing market to be ‘not good' or ‘not at all good' fell back during the month, receding by 2% to 69%.
This compares with 27% who believe it to be ‘somewhat good' - its highest level reached since the study began in November 2010.
Pessimism towards the housing market remains strongest in the North of the UK where 76% feel it is ‘not good' or ‘not at all good'.
Meanwhile, confidence regarding the employment situation bounced back slightly from the dip seen in May, but remains downbeat.
Some 83% of respondents described the employment situation as ‘not good' or ‘not at all good' in June, compared with 87% the month before. Females are the most pessimistic with 87% feeling this way.
There was no change in consumer sentiment towards their own personal finances in June, which remained steady at 54% stating they are ‘excellent', ‘very good' or ‘somewhat good'.
The 25-34 year old age group continues to have the most positive outlook on their personal finances with 60% stating they are ‘excellent', ‘very good' or ‘somewhat good', compared with 46% of 45-54 year olds who remain the most subdued.
People's optimism towards their own financial situation has also translated into a greater proportion saying that they will save more if they have money left over at the end of the month in June, reaching a historical peak of 66% (56% in May).
The balance of opinion between those who feel they will have more money in the future versus less money to spend after household bills and essentials have been paid stabilised in June at -6%.
Greater London continues to be the only region in the UK that has a positive balance - up from 1% in May to 5% in June.
