Squeeze on UK consumers is getting deeper
LOW WAGE rises and high inflation increased the pressure on consumers in April and May, two reports showed today, threatening to keep the economy in the doldrums.
Lloyds’ figures show spending power fell 0.9 per cent in April as incomes fell 1.6 per cent once inflation is taken into account.
As a result, consumers have almost £100 less to spend on non-essential items than they did a year ago.
Meanwhile Markit data showed the sharpest deterioration of household finances of the year so far in May, with 35 per cent of households reporting worsening finances and just eight per cent seeing an improvement.
Mortgage holders saw a particularly sharp fall, possibly reflecting higher standard variable rates on their debts – 45 per cent reported a decline in cash available to spent and only seven per cent saw a rise.
“The survey gives an early indication that the UK economy continues to stutter through the second quarter, with respondents signalling an overall stagnation of their workplace activity,” said Markit economist Tim Moore.
“The view from the coalface suggested that weakness in manufacturing and retail offset modest growth across the service and construction industries in the middle of the second quarter.”
Consumers fear worse is to come – inflation expectations are at an eight-month high and 45 per cent expect their finances to worsen in the next year compared to 26 per cent who foresee an improvement.