Household Spending Shows Sharp Contraction

The Squeeze Gets Worse

There are more signs that millions of people are feeling poorer and spending less, as official statistics showed disposable income falling across the country.

Household disposable income figures released on Wednesday morning showed the amount people had to spend had fallen by nearly three percent in a year.

The latest numbers suggest the Bank of England is highly likely to raise interest rates from 0.5 percent this year - with some analysts predicting they could remain at the same level until 2013.

Seperate figures showed that mortgage lending remained flat in May. There were 45,940 new mortgages approved last month, up from 45,447 in April. But amid signs that the housing market remains sluggish, the approval rate in May was down slightly on the average for the previous six months.

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