In the most dramatic evidence yet that Britons are paying for the rising cost of living by raiding savings, Yahoo UK reports that households are pulling money out of their savings accounts at the fastest rate in modern record, according to Bank of England figures. Since the recent recession began, millions of workers have suffered repeated effective pay cuts as inflation has outstripped pay rises, and while consumer spending was one of the main contributors to the sharp rise in gross domestic product in the third quarter, “consumer strength usually reflects increased borrowing but this hasn’t been the key factor recently.”
In the year to October, the amount of cash in time deposits and cash ISAs fell by 4.7%, while the amount families have in their instant access current accounts or in their pockets rose by 11.2%. This inflationary shift of cash is the biggest since comparable records began in the 1970s.
In the past year, families have withdrawn £23bn from their long-term savings accounts to convert into cash and put into current accounts – the equivalent of around £900 for every household in the country.
It is the most dramatic evidence yet that Britons are paying for the rising cost of living by raiding their savings accounts.
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According to economists, the shift of cash is the biggest since comparable records began in the 1970s, and reverses much of the sharp increase in saving that happened at the height of the recession.
On Thursday, the Chancellor’s Autumn Statement is expected to focus on measures to help households deal with the rising cost of living, including energy bills.
Since the recent recession began, millions of workers have suffered repeated effective pay cuts as inflation has outstripped pay rises.
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Consumer spending was one of the main contributors to the sharp rise in gross domestic product in the third quarter, and a further strong increase is implied by the Bank’s money figures.
But while the figures suggest that the economy is strengthening, they will also be taken as further evidence that savers are being deterred from putting money aside by record low interest rates.
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Some also suspect that with households still facing a significant squeeze as a result of higher living costs, many are having to dig into their savings in order to afford day-to-day items.
So the UK economy is surging and being lauded as evidence of QE’s efficacy but the reality is inflation is eating away at people’s wealth and hot money flows have caused the cost of living to rise dragging out the mainstay of future growth – savings – to meet consumption needs today. How long before government inflation data reflects this?
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GosrIkf0NTc/story01.htm Tyler Durden