Household spending on essential items grew at the fastest rate in more than three years in December, with most people planning to cut back as their budgets were squeezed, according to a report.
Essential spending increased by 1.8% in December compared with a year earlier, marking the biggest annual rise since September 2013, the Lloyds Bank Spending Power Report found.
Spending on groceries leapt by 2.9% year-on-year - the fastest growth since July 2013. Fuel expenditure, which had been declining for nearly three years until September 2016, surged by 9% year-on-year in December.
More than half (51%) of people questioned for the report have a negative view of inflation.
And faced with increased outgoings, more than half (56%) of those asked in December said they planned to cut back on non-essential spending in January.
Robin Bulloch, managing director at Lloyds Bank, said: "With a majority of people expressing concern around current levels of inflation, it's no surprise that most consumers plan to cut back on luxury items. A squeeze on household budgets now looks ever more certain as we move through 2017."
Essential spending includes regular household bills such as rent, mortgage, utility bills, food and fuel.
More than 2,000 people took part in the survey about their current and future spending habits.
Office for National Statistics (ONS) figures recently showed the Consumer Price Index (CPI) measure of inflation hit 1.6% in December, reaching the highest level since July 2014.
Economists have predicted inflation is likely to take bigger upward strides in the coming months, as the effects of falls in sterling and the rising wholesale costs of goods are passed on to consumers at the tills.