London, April 24 (IANS) British consumer spending power continued to slow in March, dropping by 1.1 percent compared to a year earlier reaching the lowest level since February 2011, Lloyds TSB bank said in a report Monday.
This equates to 113 pounds ($181.7) less spent on non-essential items a year, the report said. Meanwhile, spending on essential items rose to 6.2 percent, the fastest rate in over a year, largely driven by an increase in expenditure on food and drink, gas and electricity and debt repayment, Xinhua reported.
Figures show that Britain's Consumer Price Index (CPI), a major gauge for inflation, rose to 3.5 percent in March from 3.4 percent in the previous month.
The Office for National Statistics said high food and clothing prices pushed up inflation. Meanwhile, retail prices index inflation fell slightly to 3.6 percent from 3.7 percent.
The Lloyds report said consumers are feeling the biggest squeeze in spending power in over a year. A major factor behind the fall is weakening income growth, which slowed to 2.4 percent in March, compared to 3 percent in February.
Income is now at its lowest rate since February 2011 and remains below inflation.
However, consumers also spent an extra 33 percent on vehicle fuel in the last week of March compared to the week before in reaction to the threat of a fuel distribution strike. Overall, spending on fuel in March rose 12 percent compared with the previous month, said the report.
The average price of petrol in Britain continued to gain momentum and hit a new high to 142.28 pence per liter.
"Some 64 percent of people believe they are spending more on petrol and diesel compared to a year earlier," said Patrick Foley, chief economist at Lloyds TSB.
He said contrary to expectations at the start of the year, the squeeze on consumers is not yet beginning to ease. Although overall inflation declined in the five months to March, prices of essentials are rising at an increasing rate, whilst at the same time growth in income has slowed.
"The pace of economic recovery is thus likely to remain very weak over the next few months at least, with subsequent improvement dependent on a stabilization in living costs and impetus for growth from outside and consumer sector, particularly exports," Foley said.
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