By Michael Millar
Date: Monday 18 Jun 2012
Consumers had 34 pounds less to splash on discretionary items in May compared with the same time last year as household budgets continued to get squeezed.
The 0.3% decline in spending power highlighted conditions for consumers remain tough due to wages not keeping up with inflation.
The survey by Lloyds Banking Group found that people were not confident about the amount of spare cash they would have in the future with a quarter (25%) feeling that they would have less to spend in six months time, compared to just one in five (20%) who think they will have more.
However, the recent easing in the rate of inflation was reflected by growth in spending on essentials falling back to 3.9% from 4.6% in April.
The latest inflation figures show that price rises slowed more than expected in April pushing the Consumer Prices Index (CPI) down to 3%, the lowest rate in two years.
Analysts had expected CPI to fall to 3.1%, from 3.5% in March.
Patrick Foley, chief economist at Lloyds TSB, which carried out the research, said weak income growth and stubbornly high inflation was ensuring that the squeeze on consumers remained in place longer than many thought it would.
"Growth in spending on essentials is now showing signs of moderating which is positive but the weakness in income growth is severely limiting the benefits for consumers," he said.
"I would expect the benefits of falling inflation on consumers' spending power will be limited until we also see a stronger economy and faster growth in incomes."
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