Record finance squeeze hits families
Families are feeling the biggest squeeze on their spending power in more than a year, a study warned today.
Consumers' spending power deteriorated further in March, falling by 1.1 per cent on a year earlier after inflation, at its lowest level since February last year, equating to £113 less a year to spend on non-essential items, the Lloyds TSB Spending Power Report said.
Spending on essentials is rising at its fastest rate since records began in June 2010 at 6.2 per cent annually, largely driven by an increase in food and drink, gas and electricity bills and debt payments.
Consumers also spent a third more on vehicle fuel in the last week of March compared with the week earlier as the threat of strikes loomed, the study said.
30% off on our collection range and other selected fabrics. alternatively call 809887 and we will bring our samples to you for our friendly hassle free quote.
Contact: 01472 809887
Valid until: Saturday, July 13 2013
There was a 12 per cent rise in spending on vehicle fuel in March compared with the previous month as people rushed to the pumps and more than six in ten people said they are spending more on petrol and diesel than they were a year ago.
Meanwhile, income growth remains below inflation and has slowed to its weakest rate in more than a year, to 2.4 per cent from 12 months ago.
Patrick Foley, chief economist at Lloyds TSB, said: "Contrary to expectations at the start of the year, the squeeze on consumers is not yet beginning to ease.
"Although overall inflation declined in the five months to March, prices of essentials are rising at an increasing rate, while at the same time growth in incomes has slowed.
"The pace of economic recovery is thus likely to remain very weak over the next few months at least, with subsequent improvement dependent on a stabilisation in living costs and impetus for growth from outside the consumer sector, particularly exports."
Nearly three-quarters of those surveyed had noticed an increase in the cost of essentials and everyday spending, while just 19 per cent believe costs have remained the same or decreased.
Seven out of ten people said they were concerned about fuel price hikes while three quarters of those surveyed were worried about the effects of inflation on gas and electricity prices.
Figures released last week showed that a fall in the number of supermarket promotions triggered an unexpected rise in the rate of inflation in March.
The CPI rate of inflation rose to 3.5 per cent, from 3.4 per cent in February, the Office for National Statistics said, halting five months of declines and defying City expectations that it would hold steady.
Households have come under intense pressure due to high inflation and soaring bills, while employment conditions have deteriorated and record low interest rates have given people little real return on their savings.
The Lloyds TSB report defines spending power as income left over after spending on essentials. It measures payments into Lloyds TSB current accounts and subtracts regular spending such as rent, mortgage payments, debt payments, utility bills, council tax, TV licences, food and fuel.
The study also asks 2,000 consumers about their spending habits.
Richard Lloyd, Which? executive director, said: "We know a great swathe of UK consumers are finding it tough, with people struggling with rising fuel, energy, mortgage and food costs.
"Our own research shows one in four people being forced to use their savings to buy daily essentials like food, and one in five going into debt to buy these things.
"With consumer confidence so low, and people running down their savings and assets, an increasing number of household budgets will remain vulnerable until at least 2016."