Spending power 'increased in May'
Britons saw their spending power increase in May despite further price hikes to the cost of essentials, research has indicated.
Year-on-year spending power was up by 4.4%, more than reversing the 0.3% dip in April, and continuing the trend seen in the first quarter of the year, according to Lloyds TSB.
Earnings growth was the main factor driving the improvement, with people's incomes an average of 3.9% higher than they had been in May last year, more than offsetting the 2.3% hike in the cost of essential goods and services.
Patrick Foley, chief economist at Lloyds TSB, said: "Looking beyond the April data that has been affected by the timing of holidays, growth in spending power appears to be back in line with the improving trend seen since the beginning of the year."
Around 43% of people still said money was tight, despite the increase in pay seen in the past year, while just 16% said they were living comfortably.
Half of people also said their finances were bad, while 65% of people are spending at least three-quarters of their income on essentials. At the same time, 21% of consumers said they would have to use savings or credit cards to make ends meet.
But people are feeling more upbeat about the state of the economy and the employment situation, with just 40% of people saying they thought these were bad, compared with 47% in April.
People were also feeling more positive about inflation, with 18% thinking the outlook for inflation is improving, up from 13% a month earlier.
Only one in five consumers now thinks they will have less money in six months' time, the lowest figure since November last year.
The group added that May was the first month in which spending power had risen above the rate of inflation since mid-2010.