Family budgets are more squeezed than at any time in five decades, according to official figures out yesterday.
The amount households have saved up fell in the first three months of the year - the first time it has done so since 1958.
The blame was put on the rising costs of mortgages, energy, food and other basics.
The figures from the Office for National Statistics also showed that the economy stagnated in the second quarter of 2008, raising fears of a full-scale recession by Christmas.
It is the first time since 1992 that growth has been at zero.
City analysts say budget pressures, loss of confidence and costlier credit have conspired to curb consumer spending.
Shops and manufacturers are bracing themselves for a spiral of falling sales and job losses.
City analysts predict falling economic output in the second half of 2008 in a recession that will last through 2009.
Charles Davis, of the Centre for Economics and Business Research, pointed out that households were 'dissaving' - spending their savings rather than adding to them.
'UK households failed to save in the first quarter,' he said.
'Previously, the savings ratio had been estimated at 1.1 per cent, but has been revised down to a dissaving of 1.1 per cent.
'The last time overall dissaving occurred in a quarter was in 1958 - when Harold Macmillan was prime minister.
The squeeze on real disposable-incomes is clearly impacting households' capacity to put money aside.'
He said the world economic crisis would change consumer behaviour.
A buy-now-pay-later philosophy was being replaced by belt-tightening and strict controls on spending that will hit firms hard.
Howard Archer, economist at Global Insight, a financial analysis firm, said declining savings reflected meagre growth in disposable incomes.
'This reinforces the belief that consumer spending is set to be reined in for an extended period,' he added.
'We expect the economy to contract in the second half of 2008 and the early months of 2009.'
The firm is predicting that economic output will contract by 0.2 per cent in 2009, after growth of just 1.1 per cent in 2008.
Paul Dales, of Capital Economics, another consultancy, said the figures 'paint a worrying picture of a very unbalanced UK economy'.
He said the inability of households to save 'shows just how stretched households' finances are'. continues here
The amount households have saved up fell in the first three months of the year - the first time it has done so since 1958.
The blame was put on the rising costs of mortgages, energy, food and other basics.
The figures from the Office for National Statistics also showed that the economy stagnated in the second quarter of 2008, raising fears of a full-scale recession by Christmas.
It is the first time since 1992 that growth has been at zero.
City analysts say budget pressures, loss of confidence and costlier credit have conspired to curb consumer spending.
Shops and manufacturers are bracing themselves for a spiral of falling sales and job losses.
City analysts predict falling economic output in the second half of 2008 in a recession that will last through 2009.
Charles Davis, of the Centre for Economics and Business Research, pointed out that households were 'dissaving' - spending their savings rather than adding to them.
'UK households failed to save in the first quarter,' he said.
'Previously, the savings ratio had been estimated at 1.1 per cent, but has been revised down to a dissaving of 1.1 per cent.
'The last time overall dissaving occurred in a quarter was in 1958 - when Harold Macmillan was prime minister.
The squeeze on real disposable-incomes is clearly impacting households' capacity to put money aside.'
He said the world economic crisis would change consumer behaviour.
A buy-now-pay-later philosophy was being replaced by belt-tightening and strict controls on spending that will hit firms hard.
Howard Archer, economist at Global Insight, a financial analysis firm, said declining savings reflected meagre growth in disposable incomes.
'This reinforces the belief that consumer spending is set to be reined in for an extended period,' he added.
'We expect the economy to contract in the second half of 2008 and the early months of 2009.'
The firm is predicting that economic output will contract by 0.2 per cent in 2009, after growth of just 1.1 per cent in 2008.
Paul Dales, of Capital Economics, another consultancy, said the figures 'paint a worrying picture of a very unbalanced UK economy'.
He said the inability of households to save 'shows just how stretched households' finances are'. continues here
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