The squeeze on household income intensified in November, when inflation hit a six-year high.
The Office for National Statistics (ONS) said that inflation rose to 3.1% during the month.
The rise means that inflation now outstrips wage growth, with the most recent data available showing that average weekly wages are growing at 2.2%.
While the rise is above of the Bank of England’s target rate, Bank of England governor Mark Carney has said previously that he expected inflation would peak around October or November, meaning that further rises should not be expected.
In November, the Bank of England raised its key interest rate for the first time in more than a decade from 0.25% to 0.5%.
While the rise was incremental, experts pointed to the psychological impact such an event could have on consumer confidence.
November’s rise in inflation could have a material effect on consumer spending abilities.
This means that retailers targeting discretionary spend, already under pressure due to a combination of socio-economic uncertainty and a shift to leisure spending, could be hardest hit.