Surge in essential spending as concern mounts on inflation

1st February 2017

The biggest rise in food and drink expenditure in over 40 months has driven consumers’ essential spending to its highest level of growth since September 2013, according to the latest Lloyds Bank Spending Power Report.

Overall essential spending grew by 1.8% in December, a fourth consecutive month of positive growth. Lloyds Bank’s analysis of its own current account data also shows that spending on groceries leapt by 2.9% year-on-year – the highest rate of growth since July 2013, and up significantly from the rate of 1.6% in November.

Fuel expenditure, which declined consecutively for almost three years until rising in September 2016, rose sharply by 9.0% year-on-year, a fourth consecutive month of increasing spend and the biggest year-on-year increase on record.

With UK Consumer Price Inflation hitting 1.6%, Lloyds Bank’s regular consumer survey – conducted in conjunction with Ipsos MORI – found that the percentage of people with a negative view of inflation grew again in December, by 2pp, to now stand at 51%. Faced with increased outgoings and sustained inflation, over half (56%) of those interviewed said they planned to cut back on non-essential spending in January.

Robin Bulloch, Managing Director, 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.”

Year-on-year growth in essential spend: January to December 2016


Source: Lloyds Bank