Households feeling the pinch of inflation
London(online-unsecured-loan.co.uk) July 05, 2008:The average Briton household is now 15 percent worse off than what it was in 2003. This fact is supported by the recent Annual Discretionary Income Study of Ernst & Young. The report reveals purchasing power of the average Briton customer has fallen dramatically in the face of massive price hikes in the cost of living due to the high inflationary pressures. Many segments of the UK consumer market are clearly feeling the pinch as the hike in household costs are far outstripping relatively modest wage inflation.
After the deduction of tax contributions and monthly household bills, the average family now has under 20 percent of its gross income left over. This leftover was 28 percent in 2003. The pace of the retardation of consumer spending has accelerated rapidly over 2007. The ratio of monthly spending and gross household income is falling by almost 12 percent in 2007-08.
This is the fastest rate of decline over the last five years. so, undoubtedly the household budgets are under enormous strain. The impact of falling real estate prices on the consumer's propensity to spend, and the consumer economy is undoubtedly on an acid test. However, the agency feels that the worst may be yet to come in the consumer market.
The utility prices rise by as much as 40 percent in 2008. In a scenario when interest rates are increased to control rising inflation, consumers and consumer facing businesses will are destined to face the slow down.
