Poor income growth puts pressure on households
Families are £8 worse off every month 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 has found.
Incomes grew by 1.7% annually, while spending on essential items grew at a faster rate of 3.3% year-on-year, with spending on gas and electricity bills up by 8% on a year ago.
Households are set to come under further pressure after both 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.
"The pattern of consumers following rather than driving economic developments appears set to continue," he added.
The proportion of people surveyed who felt the UK's economic situation was "not at all good" increased on the previous month to 45% in September, although this is still four percentage points lower than a year ago.
Looking to the next six months, the study found that many people are continuing a trend seen over the last year of becoming slightly more optimistic about the state of their finances.
However, overall more people still believe they will be worse off than better off in six months' time.
The report measures payments into Lloyds TSB current accounts and subtracts essential spending on regular payments to calculate people's spending power.
It also regularly asks over 2,000 people about spending habits.
Level of people surveyed who felt our economic outlook was not good