Poor income growth reduces spending power

Consumersí spending power has fallen by 0.9% between April 2011 and April 2012, leaving households out of pocket by an average of £100 a year.

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The fall in spending power has largely been attributed to a fall in real incomes, down by 1.6% in the past year, and a poor growth rate for earnings before inflation. The 2.2% rate recorded last month was the most sluggish since February 2011.

Consumers are continuing to pay more for essential items, up by 4.6% in a year on year comparison, though their budgets have been repeatedly squeezed by the faltering UK economy.

ìHousehold finances are still under real pressure despite the significant falls in inflation we have seen over the past seven months,î said Patrick Foley, chief economist at Lloyds TSB.

ìAlthough unemployment has been broadly stable, wage growth has eased and so incomes are growing well below their long term average.î

The figures, from Lloyds TSB, show that 86% of consumers have noticed a hike the costs of everyday essentials. This is up from 73% in March this year, indicating that the recession has made consumers even more financially conscious.

Spending on both gas and electricity and water bills has also increased, while figures for the growth in spending on fuel and food decreased.

ìEven though we expect to see further falls in inflation, the weakness in the broader economy is likely to mean that consumers aren’t going to feel any better off in the near future,î added Mr Foley.

This pessimism is shared by consumers, with the percentage of those who feel that the economic situation in the UK is ënot at all good’ rising from 45% to 51% between March and April.

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