Inflation has been steadily ramping up over the last year, and many people will undoubtedly be starting to see the impact on their wallets, particularly when sluggish wage growth is taken into account. It's little wonder, then, that consumers are becoming increasingly concerned, with research from Lloyds Bank revealing that inflation concerns have hit their highest level since January 2014.
The research found that 65% of UK adults surveyed felt negative about current levels of inflation in July, up from 60% in June's survey and just 41% in July 2016. Confidence in the country's financial situation has also deteriorated, with those feeling negative up 2% month-on-month in July and 7% over the last 12 months, with the figure now standing at 69%.
Happily, this isn't yet filtering through into people's personal finances, with 64% of respondent feeling positive about their own financial situation in July, unchanged from June, and just 3% below the reading in July 2016. A further 79% reported feeling positive about their job security, down just 1% on a monthly basis and an increase of 2% year-on-year.
Things aren't quite so rosy when looking ahead, however, with just 20% believing that they'll be saving more in six months' time than they are now, down from 27% in June, while just 15% believe that they'll be paying off more debt, down from 20%.
Consumers' essential spending continues to edge up, albeit at a slightly slower pace – the report found that consumers spent 2% more on essentials than they did a year ago, but this is down from the annual growth rate of 3% recorded in June. Spending on food ticked up by 2%, while fuel spending rose by 5%, which may sound like a lot, but is actually the lowest rate of growth seen since October last year, and well below the 13% rise seen in April.
This hasn't stopped people from worrying about the impact of inflation, however, as Robin Bulloch, managing director of Lloyds Bank, comments:
"Despite a slight slowdown in the rate of essential spending growth over the summer, concerns around inflation have continued to build, which has an impact on future intentions. With the rate of savings already at a record low, significantly fewer people now expect to be putting more money aside in six months' time. While the pressure on disposable income makes this understandable, it does mean consumers are less able to absorb any further squeeze on their finances."
If you're starting to worry about how inflation could impact your finances, it's vital to start getting prepared – and that means saving as much as you can and paying down debt. After all, if your disposable income starts to be eaten up by the rising cost of living, it makes sense to pay off chunks of debt now, rather than waiting for it to get more difficult later down the line.
The same applies to saving – by paying into a savings account and building up your pot now, you can be confident that you've got a financial buffer in place should things get tough, giving you valuable peace of mind should inflation start to bite. That way, you should be able to absorb any increases in essential spending, and because you've already paid down your debt, you'll have more disposable income to play with.
Find the best savings rates to build your financial buffer
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.