Spending on essentials soars as inflation starts to bite consumers
Consumer spending on essentials has increased at its highest rate since September 2013 as inflation started to bite in December.
Essential spending grew 1.8 per cent in December, rising for the fourth month in a row, according to Lloyds Bank. Grocery spending jumped 2.9 per cent year-on-year, the highest growth rate since July 2013.
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Fuel expenditure rose even more dramatically, up nine per cent year-on-year, as rising oil prices impacted on consumers. This was the biggest fuel price rise Lloyds Bank had ever recorded.
Robin Bulloch, managing director of Lloyds Bank, said: "The surge in essential spending over the last few months shows no sign of abating. With a majority of people expressing concern around current levels of inflation, it's no surprise that most consumers plan to cut back on luxury items.
"A squeeze on household budgets now looks ever more certain as we move through 2017."
Inflation reached 1.6 per cent in December – the biggest price rise in two years – and experts are predicting inflation will rise to three per cent this year.
The figures come as Ocado became the latest retailer to say it would be increasing prices this year. Food supplier and manufacturer Premier Foods has also said it will be increasing its prices in the "mid-single digit" range.