Families are feeling the biggest squeeze on their spending power in more than a year, a study warns today.
Consumers' spending power deteriorated further in March, falling by 1.1% on a year earlier after inflation, its lowest level since February 2011, equating to £113 less a year to spend on non-essential items, the Lloyds TSB Spending Power Report says.
Spending on essentials is rising at its fastest rate since records began in June 2010 at 6.2% annually, largely driven by an increase in food and drink, gas and electricity bills and debt payments.
Consumers also spent a third more on vehicle fuel in the last week of March compared with the week earlier as the threat of strikes loomed, the study says.
There was a 12% rise in spending on vehicle fuel in March compared with the previous month as people rushed to the pumps. More than six in 10 people said they were spending more on petrol and diesel than a year ago.
Meanwhile, income growth remains below inflation and has slowed to its weakest rate in more than a year, to 2.4% from 12 months ago.
'Not getting better'
Patrick Foley, chief economist at Lloyds TSB, says: "Contrary to expectations at the start of the year, the squeeze on consumers is not yet beginning to ease.
"Although overall inflation declined in the five months to March, prices of essentials are rising at an increasing rate, whilst at the same time growth in incomes has slowed.
"The pace of economic recovery is thus likely to remain very weak over the next few months at least, with subsequent improvement dependent on a stabilisation in living costs and impetus for growth from outside the consumer sector, particularly exports."
Nearly three-quarters of those surveyed had noticed an increase in the cost of essentials and everyday spending, while just 19% believe costs have remained the same or decreased.
Households have come under intense pressure due to high inflation and soaring bills, while employment conditions have deteriorated and record low interest rates have given people little real return on their savings.
The Lloyds TSB report defines spending power as income left over after spending on essentials.