Households hit by rising cost of living

 
Julian Harris
Follow Julian
HOUSEHOLD finances remain under intense pressure from rising living costs, according to several leading surveys released this morning.

Despite a slowdown in the UK’s official measure of consumer price inflation in recent months, people still fear more price hikes.

“Households’ current inflation observations climbed to a six-month peak [this month], while price expectations for the year ahead also rose,” the Markit household finance index reported.

Markit’s headline rate slipped to 37.8 for March, down 0.9 points from February. All scores below 50 indication a deterioration in people’s finances.

Rising petrol prices are partly responsible for higher inflation perceptions, Markit said, while a separate report from Lloyds TSB showed an 8.9 per cent rise in vehicle fuel costs last month, compared with a year earlier.

The Lloyds spending power report found that spending on essential items jumped by six per cent in the 12 months to February, while incomes grew by just three per cent (see graphic, right).

“Despite official figures showing that inflation is declining, spending on essentials is still heading in the opposite direction, indicating that consumers are not yet feeling the benefit,” the report said.

Hikes in utility bills were the main driver, Lloyds said.

Meanwhile another survey, from the Halifax, said that the cost of running a home has increased for seven in 10 Britons, in the last year.

The Halifax said this morning that for one in 10 Brits, disposable income has collapsed by over £300 a month.

Yet the research claimed that 87 per cent of respondents “have no idea just how much of their income is actually being spent paying these rising costs”.

“We all need to be aware of the reality of rising costs and try and avoid slipping into the red,” said Paula Llewellyn, from the Halifax.

“It is crucial that everyone takes an active role in checking bills and keeping an updated budget of monthly expenditure in order to pinpoint exactly where income is being spent.”

However, the Markit index for March showed some signs that the squeeze on households could be bottoming out.

Job security declined at the slowest rate since April 2010, it said, while consumers’ feelings about making major purchases was the least negative since December 2010.

Savings are also being eroded at a slower rate, the report found.