By Daniel Hunter

The Lloyds TSB Spending Power Report reveals that, after inflation, spending power growth fell to -0.1% in November, the equivalent of around £11 less a year to spend on non-essential items.

Therefore, despite positive retail sales figures from the high street in the run up to Christmas, the squeeze on household budgets remains and is still to show any material signs of easing.

The latest data continues a period of relatively weak income growth in real terms with income struggling to keep pace with the rise in inflation in November. For non-essential items, annual growth in inflation ticked up to 2.7% during the month, from 2.4% in October. However, much of this recent rise is due to the impact of higher tuition fees. Therefore, non-essential inflation will be lower for a significant proportion of the population.

Within essential spending, growth in automotive fuel spend increased for the third month in a row to 4.2%. This can be attributed to people buying a higher quantity of fuel than at the same time last year, as well as an increase in prices at the pump.

By contrast, annual spending growth on gas and electricity bills declined for the seventh consecutive month, falling to 4.4%. However, as price rises have been passed on to consumers later in the year in 2012 compared with 2011, an increase in growth in spending on utility bills can be expected in future months, further adding to the squeeze on households.

The country’s current financial situation remains a concern for most people. While sentiment has remained stable for the past two months, the situation is much improved when compared with the same time a year ago, at which point sentiment was at its lowest level since the index began in November 2010, with well over half of people stating the situation was ‘not at all good’. Since November 2011, there has now been an 11 percentage point reduction in this figure, from 55% to 44%.

There was a small decline in people’s perceptions towards their own personal financial situation in November, with 52% stating that their situation is ‘not at all good’ or ‘not good’ versus 49% in October. This is possibly a result of the impending Christmas holidays, a time at which personal finances are brought into sharper focus than is perhaps the case at other times in the year. Within this measure there is a noticeable contrast in optimism between the sexes, with 10% of males stating their personal financial situation as either ‘excellent’ or ‘very good’ compared with 5% of females.

The view on the inflation situation in the UK worsened slightly from October, however the picture remains positive when compared with a year ago. In November 2011, 87% of people stated that the situation was ‘not at all good’ or ‘not very good’. This is down to 81% in November 2012.

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