Incomes squeezed yet further
On average, this equates to almost £8 a month less to spend on non-essential items.
Annual income growth meanwhile fell to its lowest level since December 2010 at 1.7%. In real terms annual income growth decreased to -1.2%.
Annual growth in essential spending remained resilient, dropping 0.1 percentage point to 3.3% compared to August.
At 1.7%, income growth would appear to be the key driver behind the weakness in spending power during September, said Lloyds.
Incomes grew at the weakest rate since December 2010, and some way off the pace seen towards the second half of last year. At the same time, there was little change to essential spending growth during the month compared to August as the growth in spending on automotive fuel (2.5% in September compared to 0.7% in August) was offset by a continued decline in the growth of household bills spending, in particular, gas and electricity bills – where spending growth declined by 1.4 percentage points to 8%.
People are now spending 3.3% more on essential items compared to the same time last year – the lowest growth rate seen in this measure since December 2011 – while their reported average monthly grocery spend fell back to £269 in September compared to £273 in August.
Patrick Foley, chief economist at Lloyds TSB, said: “Despite the volatility in the data, it is clear that the underlying trend in real incomes is negative despite the fall in inflation from last year’s high. I expect inflation to fall only slightly further over the coming months so any improvement in the situation will need to be driven by growth in incomes and this will depend on the wider economy. The pattern of consumers following rather than driving economic developments appears set to continue.”
Despite greater pressure on household budgets in September, consumer sentiment towards their personal financial situation remained buoyant during the month.
Some 51% believe their personal situation to currently be ‘somewhat good’ to ‘excellent’ while, overall, consumers are generally feeling more comfortable with regards to their finances compared to 12 months ago.
Over this period there has been a 6 percentage point reduction in the number of consumers who feel that money is tight or who don’t have enough to meet their monthly outgoings.
This year-on-year change has been driven by a more positive opinion amongst people aged 18-34, with the proportion who feel that money is tight or that they don’t have enough to cover essentials falling by 11 percentage points to 48%.
Saving remains the dominant behaviour for those with discretionary income with 55% stating that they are likely to save any money left over at the end of the month. This measure has varied over the course of 2012 between 55% and 59%.