The survey found that 66 per cent of respondents believed interest rates will be higher rather than lower in a year's time.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "The survey shows that consumers are bracing themselves for the worst when it comes to the squeeze on the household purse. Should the MPC be forced to increase rates over the months ahead, then at least this will come as no surprise to consumers and limit any negative reaction."
Fears about the health of the UK job market intensified further in July according to the Consumer Barometer. This was illustrated by the balance of respondents that believed employment prospects are better now than 12 months ago, which fell 12 per cent to -57 per cent in July, a new survey low. This is 40 per cent below the most recent peak in labour market confidence in September 07 when the balance was -17 per cent.
At the same time, job security declined for a fifth consecutive month, also to a survey low. The balance of consumers who felt more rather than less secure was -17 per cent, from -14 per cent in June.
Despite the current high food and fuel prices, the survey found that consumers increasingly believe that prices will continue to rise over the next 12 months. The balance of consumers that predicted prices would be even higher in a year's time was 88 per cent, up 2 per cent from June. Similarly, consumer inflation expectations rose further in July. When asked what the official rate of inflation would be in year's time, consumers estimated a record 4.8 per cent, up from 4.7 per cent in June.
