How is inflation affecting household spending?

Inflation significantly affects household spending by raising the costs of essential goods and services. For instance, inflation rates, driven primarily by rising food, energy, and housing costs, reached 30-year highs, impacting almost all households in the UK. This has resulted in many families spending more in cash terms while potentially purchasing less or opting for lower-quality items to manage their budgets^[1][3][4].

Higher-income households have tended to maintain their consumption levels, often by saving less or drawing on existing savings, while lower-income households are more likely to cut back on spending or switch to cheaper alternatives^[2][6]. Overall, households are facing difficult choices about spending amidst continued inflationary pressures^[5].