Long squeeze on pay eases as inflation slides

Tim Wallace
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HOUSEHOLDS’ spending power increased in June – the first rise in a year – as the long squeeze on incomes at last begins to ease, according to a Lloyds report out today.

Spending power in June was 0.7 per cent higher than in the same month of 2011, the bank revealed, as income growth outstripped inflation for the first time in 12 months.

That leaves consumers an average of £80 per year, or £7 per month, more to spend on discretionary items.

Income growth came in at 2.8 per cent on the year, while growth in essential spending rose 3.3 per cent.

Growth in spending on non-essentials fell to 1.9 per cent, leaving consumers with more discretionary spending power.

The improvement was driven by debt repayments falling 0.6 per cent and petrol and diesel spending growth slowing to 1.6 per cent – a sharp fall from 11 per cent at the start of the year.

That has contributed to a six percentage point jump in the number reporting they have money left over at the end of the month.

But that takes the total to only 50 per cent, leaving the other half of the population still feeling squeezed and failing to save.

“We are still a long way from consumers having a huge amount of confidence in the economy, but there are small signs that inflation is one thing they are worrying less about,” said Lloyds TSB’s Jatin Patel.

“That more people have money left over once they have covered their monthly outgoings is positive, but with many still negative about the outlook for employment, it is unlikely that this will translate into a lot more spending in the high street.

“It is more likely that we will see people concentrating any spare cash on paying down debts or savings for a rainy day.”

The survey found 91 per cent believe the country’s employment situation is “not good” – down just one percentage point on May’s figure despite positive official jobs data for the month.