INFLATION expectations have soared to a record high this month, as rising prices add to the squeeze on household spending, a survey said today.
With 89 per cent of respondents expecting the cost of their purchases to rise this year, the Markit household finance index dropped to its lowest level since April 2009.
“The recent VAT increase, higher inflation and squeezed incomes mean that households are once again running just to stand still,” said Tim Moore, senior economist at Markit.
Over one third of households reported a recent deterioration in their finances, while almost half of mortgage holders reported a negative outlook for their finances.
Mortgage holders may be wary of impending interest rate hikes, the report said, as inflation stubbornly climbs upwards.
And with interest rates at a historical low, savings continued to fall, as households “sought to offset a fall in employment income,” Markit said.
Consumer price index (CPI) inflation hit 3.7 per cent in December, official data revealed last week.
There was more worrying news for the high street, as over half those surveyed indicated a fall in their willingness to make major purchases.