Consumer boom from low prices slows as food spending rises

Consumers are still enjoying lower prices for essential goods although the benefit of rapidly tumbling costs is fading, Lloyds Bank said today.

Its latest Spending Power index showed spending down 0.6% year-on-year in March, albeit a slower pace of decline than seen in previous months. Food spending, which accounts for over 40% of all essential spending, also rose 0.2% on last year in March, registering its first positive growth since October last year.

Overall inflation remains close to zero but it is expected by the Bank of England to creep higher this year as the impact of previous steep price declines falls out of the figures. Lloyds said the latest decline in overall spending compared with an 0.8% annual decline in February and a 1% fall in January

Drivers are still spending less on petrol but the decline here is also slowing, down 4.8% on last year in March compared with a 5.4% dip in February, as prices at the pump edge higher.

Lloyds’ research, using Ipsos MORI polling, shows the share of people who say they have money left over after they have covered all monthly outgoings remains steady at 81% since the start of the year. But the number of people who think it likely they will have less disposable income in six months’ time rose to 20% from 16% in February.

Chief economist Patrick Foley said: “Spending power confidence held generally steady in March, with a broadly upbeat assessment of the labour market and personal finances continuing to prevail among households. Confidence in the country’s financial situation also rebounded somewhat following February’s dip.

“Nevertheless, a sense of caution continues to surround the outlook with fewer households expecting to have the same amount of disposable income in six months’ time.