Wages fail to keep pace with cost of living hikes
Consumers' finances continued to come under pressure in August as workers' pay failed to keep pace with hikes in the cost of living, research indicated.
Around 30% of people reported a deterioration in their finances during the month, with just 6% saying they improved, according to a survey by Markit and YouGov.
The groups said people's worsening financial situation was caused by a fall in income from employment, combined with a sharp rise in the price of goods and services during the month.
At the same time, falling job security, particularly within the public sector, impacted on people's confidence, while people are also worried that house prices are falling again.
The findings were backed up by separate research from supermarket group Asda, which found that households' disposable income had dropped by 2.5% or £5 a week during the past year.
The group said the average family had only £175 a week left over to spend during July after meeting all of their essential outgoings, down from £180 in the same month of 2009.
It blamed the fall in income on the fact that pay rises had failed to keep pace with inflation, with average earnings rising at an annual rate of 1.6% in the three months to the end of June, while the latest figures on inflation show it was running at 3.1% in July.
The Centre for Economics and Business Research, which compiles the report for Asda, warned with inflation expected to stay above 2% for the next year, families' spending power was likely to reduce further during 2011.
The Markit and YouGov survey also found that households were pessimistic about the outlook for their finances in the coming 12 months due to expected tax rises and government spending cuts.
Around 47% of households expect their financial position to worsen during the coming year, while only 25% think it will improve. People working in the public sector are more downbeat than those working in the private one, although private sector workers were at their most pessimistic since June last year.
One in four people thought job security worsened during August, while households also reported a drop in their income from employment for the third consecutive month.
At the same time, 69% of people said prices rose during the month, the highest level since the series was launched 18 months ago.
A record 86% of people expect the cost of living to continue rising in the coming year.
A weak housing market completes the depressing picture, with 23% believing their property had lost value in August, compared with 9% who thought it increased.