Worst household budget squeeze for 2 years

Markit`s monthly survey of consumers shows that consumer spending power is being cut as severely as it was in March 2009. The combination of rising fuel costs, Government austerity measures and faltering global growth is having a real effect on consumer spending, as reported by telegraph.co.uk.

The household finance index (HFI), a leading indicator of consumer spending, fell sharply to 34.4 in July 2011. It has been revealed ahead of the publication of Britain`s gross domestic product (GDP) figures tomorrow.

Economists fear that GDP growth may have fallen below zero in the second quarter, making worries about a `double dip` recession look realistic again.

Markit found that 38% of people are feeling worse off financially than one month ago. Only 6% felt their situation had improved. When finances are stretched, people may be tempted to take on additional debt and/or may struggle to make debt repayments.

According to Markit, credit card debt and unsecured lending saw the biggest jump in over a year, despite the fact that many incomes are falling. This suggests there are growing numbers of people borrowing to keep their heads above water.