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].

How is inflation affecting your household costs?

How is inflation affecting household spending?

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