Families lose £8 per month as incomes lag behind inflation

FAMILIES are £8 a month worse off than they were a year ago as the pressure on their finances tightens its grip, a report found today.

Sluggish growth in household incomes has driven the deterioration, with the amount of cash people have coming in increasing at its weakest rate since December 2010, Lloyds TSB’s spending power report for September found.

Incomes grew by 1.7 per cent annually, while spending on essential items grew at a faster rate of 3.3 per cent year-on-year, with spending on gas and electricity bills up by 8 per cent on a year ago.

Households are set to come under further pressure after energy suppliers British Gas and Npower announced price hikes on Friday.

Concerns have been raised by consumer groups about how vulnerable families and the elderly will cope, with food and some mortgage costs also on an upward march.

Lloyds TSB’s latest study comes after its research for August suggested that the pressure on consumer spending power might be easing.

It said that recent distractions, such as the Olympics and the wet summer weather, may have produced some “volatility” to the findings.

Patrick Foley, chief economist at Lloyds TSB, said: “Despite the volatility in the data, it is clear that the underlying trend in real incomes is negative, despite the fall in inflation from last year’s high.

“I expect inflation to fall only slightly further over the coming months so any improvement in the situation will need to be driven by growth in incomes and this will depend on the wider economy.

“The pattern of consumers following rather than driving economic developments appears set to continue.”