Weak income growth continues to squeeze household budgets, with spending power showing no growth in July compared to this time last year. Income growth remains weak at 2.4pc compared to a year ago, according to the Lloyds TSB Spending Power report.
Due to inflation, income growth in fact remained positive in real terms, albeit marginally, at 0.3pc.
Households were offered some relief in the form of falling inflation in the three months leading up to June, which was largely due to lower food and petrol prices. However, the report shows income growth has plummeted to its lowest level since November 2011, putting more strain on consumer budgets.
Patrick Foley, chief economist at Lloyds TSB, said: “Even though inflation is falling, weak income growth has prevented that from leading to a significant improvement in spending power. But if inflation falls further over the next year, as we expect, spending power should continue its gradual upward trend.”
Consumers hold increasingly negative views towards the UK’s financial situation, with the proportion of those who said it was ‘not good at all’ up from 43pc to 46pc, and a mere 10pc believed it to be “good”.
Figures released last week showed inflation clawed its way back up in July to 2.6pc following three months of decline. However, consumer research carried out during that time showed people were showing increased signs of optimism towards the current inflation situation, with sentiment improving for the fourth month in a row.
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