Families feel ‘the biggest squeeze yet’ on spending

Families are feeling the biggest squeeze on their spending in more than a year, a study has warned.

Consumers’ ability to spend deteriorated further in March, falling by 1.1 per cent on a year earlier after inflation, its lowest level since February 2011, 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 the records began in June 2010 at 6.2 per cent a year, 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.

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.

More than six in ten people said they were 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: “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.