UK consumers' concerns about inflation 'are highest in three and a half years'

Survey by Lloyds Bank finds people’s confidence in Britain’s financial situation has worsened amid rising prices

Worries about rising inflation among UK consumers are at their greatest in three and a half years, while people’s confidence in Britain’s financial situation has worsened, according to a survey.

A monthly poll by Lloyds Bank found that 65% of people felt negative about levels of inflation in July, up from 60% in June and the highest level since January 2014.

The report chimes with Markit’s household finance index, which is one of the most-watched measures of household sentiment and reported in July that UK households faced intense pressures over costs after a steep rise in prices for goods and services.

Inflation was 2.6% in July, and is expected to rise to 3% in coming months. Largely a result of the weaker pound pushing up import costs, inflation has outstripped growth in wages, squeezing household incomes.

Lloyds said people were also less confident about the UK’s financial situation, with 69% feeling negative, up from 67% in June and 60% in July 2016.

Despite worries over the economy, people remain relatively upbeat about their own circumstances, with 64% feeling positive about their personal financial situation in July, unchanged from June. Nearly 80% of people felt positive about their own job security, down slightly from June.

The future outlook seems more uncertain, however. The proportion of people who thought they would be saving more in six months’ time fell to 20% in July from 27% in June. Fewer people also believed that they would be paying off more debt in six months’ time, with the balance dropping to 15% from 20%.

Analysis by Lloyds of its customer account data suggests that people are cutting back spending on essentials such as rent, mortgage payments, utility bills, food and fuel. It showed that the year-on-year growth in consumers’ spending on essentials fell to 2% in from from 3% in June.

Food, which accounts for 40% of essential spending, recorded a year-on-year increase of 2%, down from 4% in June. Fuel spend rose by 5%, the lowest rate of growth since last October, and down from a peak of 13% in April.

Robin Bulloch, the managing director of Lloyds Bank, said: “Despite a slight slowdown in the rate of essential spending growth over the summer, concerns around inflation have continued to build, which has an impact on future intentions.

“With the rate of savings already at a record low, significantly fewer people now expect to be putting more money aside in six months’ time. While the pressure on disposable income makes this understandable, it does mean consumers are less able to absorb any further squeeze on their finances.”

Contributor

Julia Kollewe

The GuardianTramp

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