Prices up, spending up

Posted on Aug 14, 2023. by NTI

In news that will not be a surprise to most of you, Which? has reported that the cost of British food basics including cheese, butter and bread have surged by more than 30% in the last two years, as Britain grapples with the cost of living crisis.

Which? say that food inflation has cooled in recent months but prices are still much higher than they were two years ago. Dairy, meat and bakery items are those with the biggest increases.

However despite the general gloom, pubs, bars and restaurants are reportedly still full, and June's GDP figures beat expectations when released last week. Many economists have been predicting another recession, but this is yet to materialise.

According to GFK, a company that measures households' confidence in their finances, jobs and the wider economy, it is only a slim majority of households who believe things will get worse. This could be because despite interest rates, rents, food (and more-or-less everything) increasing in price, unemployment has remained low at 4% from its previous low of 3.5%, and businesses have paid higher wages to attract and retain workers during and after the Covid pandemic.

Joe Staton from GFK believes there is a section of the population who are recovering from lockdown - those that had/have savings are now spending them, despite the cost pressures in the economy.

As we know, those on lower incomes, and with no or little savings, are struggling to make ends meet.

Warning signs are there, however. May saw the largest net withdrawal of savings since records began in 1997, and retail sales were poor in July, according to the British Retail Consortium. Unsecured borrowing rose to its highest level in five years in July, which of course means increased potential for large numbers of individual insolvencies once the bubble begins to burst.

As we reported on CPD TAP's Consumer Issues series recently, StepChange have seen a 13% rise in clients in the first half of the year, compared with the same period in 2022 already, and those that they are helping have more debt than previous clients.

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