The Government's plans to return Britain to growth have been dealt a major blow as new figures reveal household spending fell in October at its fastest pace since January, while debt levels rose for the first time in nine months.
Release of the figures comes as David Cameron prepares to deliver a speech to the CBI today, in which he will call on companies to create a "new economic dynamism", the Telegraph reports.
He may face an uphill battle motivating business leaders as today's Markit survey found over a quarter of the 1,500 households surveyed said their finances had deteriorated since September, against just 7% who saw an improvement.
The survey's headline balance was 40.0 - where anything below 50 indicates a decline in finances - which is slightly worse than September's figure of 40.2.
Shrinking incomes drove the cuts to household spending and also appeared to be the trigger for the first increase in debt in nine months, according to the Household Finance Index.
Households also expect their property to fall in value over the coming year for the first time since MAy 2009.
"Low levels of household confidence are clearly a concern for short-term economic growth prospects," says Tim Moore, economist at Markit. "The wider economy may be set for an extended soft patch before we see the long-term gains from the deficit reduction and benefits to the private sector of a leaner government."
Against this backdrop, tomorrow's release of the latest GDP figures are expected to be crucial in determining if the government will resume quantitative easing as a way of kick-starting the economy.
Tuesday's preliminary estimate from the Office for National Statistics (ONS) is forecast to show that between July and September the economy expanded for a fourth quarter in a row, but only by 0.4%.
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