Spending squeeze remains tight
The squeeze on families’ spending power was just as strong last month as it was a year earlier, a report has found.
There has been no year-on-year improvement in people’s real discretionary wealth, as income growth remained sluggish and spending on essential items grew by 3.2% annually, the Lloyds TSB spending power report said.
Spending on food and drink was 7% higher than a year ago, showing the biggest increase out of the regular outgoings covered, closely followed by gas and electricity, which was up by 6.1% year on year.
Gas and electricity spending has recently been showing some decline, although households are set to come under further pressure this winter after a string of energy companies announced price hikes. Meanwhile, spending on car fuel was 3.3% higher year on year.
Patrick Foley, chief economist at Lloyds TSB, said: “Consumers remained under pressure in October as income growth is barely above inflation.
“Looking forward, the pick-up in automotive fuel and food spending, reflecting recent price rises, suggest that the squeeze may continue until income growth improves.”
The continued tough conditions were reflected in a decline in optimism among consumers about their spending power in the coming months.
The balance of people who believe they will have more discretionary income in six months, which is the difference between those who think they will have more money minus those who think they have less, fell further into negative territory at minus 9% in October, following a minus 3% reading in September.
Researchers said the decline is being driven by people aged 45 and over. Around a third of people in this age group believe they will have “less” or “much less” money to spend.
The monthly report looks at how much money people have left over after essential spending such as rent, mortgages and regular bills. More than 2,000 people are also asked about their spending habits.
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