A report released today says that consumers are feeling the biggest squeeze in spending power for over a year.
The Lloyds TSB Spending Power Report for March 2012 says that nearly three quarters of consumers have seen an increase in the cost of everyday and essential items over the past year. This survey was conducted between the 17th and 23rd of March, just before the rush to buy fuel.
The report is based on measuring the payments into Lloyds TSB current accounts and then takes out any essential spending such as rents, mortgages, debt repayments, utility bills, food, fuel, TV licence and council tax to leave ‘spending power’, or income left after essential spending. On top of that 2,000 Lloyds TSB customers are questions about how they are spending their money and how that will change in the future as well as how their current commitments will affect their spending power.
The Lloyds TSB report also found that:
- Consumers’ spending power fell by 1.1% from a year earlier, which is about Â£113 less a year for spending on non-essentials.
- Spending on essentials is rising at 6.2% but income only grew by 2.4%.
- Nearly two thirds of people (64%) thought that they were spending more on petrol and diesel that a year ago.
Although inflation is falling towards the government’s long term aim of 2% says the report, it has done nothing to alleviate the pressure on peoples’ pockets as wage growth stays below inflation.
The increase in spending on essential items has been driven by food and drink (up 7.5%), gas and electricity (up by 11.2%) and fuel (up by 7.9%). Buy of ‘particular note’ says the report, is that spending on debt repayments is up 1.3% on last year.
The survey also found that 91% of those asked thought that the country’s financial situation was ‘not good’ and 93% put the employment situation in the same bracket.
Jatin Patel, director of current accounts for Lloyds TSB, said:
Consumer spending power continues to be squeezed despite a lower inflation rate when compared to last year. Fuel was clearly an influencing factor on consumer behaviour and spending in March, however the cost of essential items across the board continues to put pressure on households as income growth struggles to keep pace with rising prices.