Lloyds Spending Power Report 9 for November 2011 :
– Spending power growth dropped to its lowest level this year in November, due to a combination of weak income growth and increases in the cost of essential items.
– Discretionary spending power growth, before inflation, slowed to 1.3% in November. This was the weakest growth in eleven months and the largest monthly fall since the series started (June ’10).
– The fall in spending power was driven by a sharp fall in income growth and rising spending on essentials. Incomes grew by only 1.9% in the year to November, while spending on essentials rose by 3.9% in the same period.
– This means consumers have the equivalent of around £20 less available per month for discretionary spending, as in real terms spending power has contracted by 1.8%, after inflation.
– The fall came despite consumers cutting back on essentials – either by trading down or by reducing the quantity bought.
– Consumer negativity around the country’s financial and employment situation grew, with the number believing these are not at all good at its highest level since the survey began (Nov ’10).
– Unsurprisingly, almost two fifths of consumers are looking to cut back on their spending this Christmas. A quarter will be relying on savings to fund their spending, and over a third will be turning to credit cards.
Discretionary spending power shrinks just before Christmas
The squeeze on consumers worsened just one month before Christmas, as discretionary spending power growth slowed to 1.3% in November, down from 3.2% in October, according to the latest Lloyds TSB Spending Power Report. This latest fall leaves consumers with around £20 a month less for their discretionary spending.
The sharp contraction in spending power is the result of weak income growth coupled with the rising cost of essentials. Income growth slowed dramatically this month, growing by 1.9% compared with 3.3% in October, well below current levels of inflation. The rising cost of essentials was also a factor, but with increases in spending on essentials remaining below their rate of inflation, it is clear that consumers are trying to limit the impact of inflation on their finances.
Source : Lloyds TSB