The latest Lloyds Bank Spending Power Report has found that inflation worries reached their highest level since January 2014 as consumers continue to feel the impact of rising prices and sluggish wage growth.
The monthly poll – which sees Ipsos MORI survey over 2,000 adults with bank accounts across the UK – found that 65% of people reported feeling negative about current levels of inflation in July, compared to 60% in June, and just 41% in July 2016.
Confidence in the country’s financial situation has also deteriorated, with those feeling negative up 2pp month-on-month in July, and up by 7pp over the last 12 months to now stand at 69%.
Despite continuing worries over the economy, people remain optimistic regarding their own circumstances, with 64% of people feeling positive about their personal financial situation in July, unchanged from June, and just 3pp below the level seen in July 2016. Meanwhile 79% of people reported feeling positive about their own job security, down just 1pp on June and 2pp above the level seen in July 2016.
July saw a 7pp decrease in the proportion of people who believe in six months’ time they will be saving more’ than now (down from 27% in June to 20% in July). The proportion of people who believe that in six months’ time they are going to be paying off more debt than now also decreased significantly by 5pp (from 20% in June to 15% in July).
Meanwhile, Lloyds Bank’s analysis of its own customer account data showed that the year-on-year growth in consumers’ essential spend for July was around 2%, down from around 3% in June. Food, accounting for c.40% of essential spend, had a year-on-year rise of around 2%, down from a high of 4% in June. Meanwhile fuel spend rose by around 5%, the lowest rate of growth since October last year, significantly down from the peak of around 13% in April this year.
Robin Bulloch, managing director of Lloyds Bank, said: “Despite a slight slowdown in the rate of essential spending growth over the summer, concerns around inflation have continued to build, which has an impact on future intentions. With the rate of savings already at a record low, significantly fewer people now expect to be putting more money aside in six months’ time. While the pressure on disposable income makes this understandable, it does mean consumers are less able to absorb any further squeeze on their finances.”
