Midland fears over rising prices are set to strengthen the case for a further jump in interest rates.
More than three-quarters of consumers across the West Midlands and East Midlands expect prices to increase further over the next 12 months, according to data from the latest Consumer Barometer from Lloyds TSB Corporate Markets.
The regional balance of West Midlands consumers expecting prices in general to climb over the next year rose from +70 per cent in June to +83 per cent in July, whilst those in the East Midlands witnessed similar but less marked expectations of +76 per cent in June and +78 per cent in July - both exceeding the national average of 74 per cent.
Although the survey preceded the Bank of England's recent quarter point interest rate adjustment upwards to 4.75 per cent, it suggests that consumers expect annual inflation - which was 2.4 per cent in July - to remain high and to accelerate further over the year ahead.
One risk from this that worries monetary policy makers is that it could lead to workers making higher wage demands to compensate for higher inflation, something the BoE is keen to avoid.
Figures for the West Midlands regards perceptions of whether prices in the last 12 months were up or down, revealed that on balance prices were believed to be up, with +50 per cent in June and +63 in July. The East Midlands in turn saw June balances of +56 per cent and July's of +59 per cent.
The barometer also showed - correctly as it turned out - that the majority of consumers in the West and East Midlands in July were expecting interest rates to rise.
The balance of East Midlands consumers believing that interest rates would be higher rather than lower at this time next year rose from +67 per cent in June to +75 per cent in July whilst the balance in the West Midlands dropped from +65 per cent in June to +64 per cent in July.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "Keeping a lid on inflation expectations is crucial for the Bank of England as it strives to achieve its two per cent inflation target. "This survey shows that inflation expectations remains elevated and perhaps the Bank has more to do to keep them down. Its own analysis shows that keeping inflation expectations low helps keep down wage demands and so general price inflation pressures."
Despite their expectations for inflation and interest rates, however, consumers in the West Midlands are feeling increasingly safe in their jobs.
The balance of West Midlands respondents feeling more rather than less secure in their jobs, compared to the same time last year, rose from -7 per cent in June to 0 per cent in July - a nine-month high. East Midlands consumers, by comparison, saw job security balances drop from -7 per cent in June to 19 per cent in July.
The balance of East Midlands consumers believing general employment prospects to be better rather than worse than 12 months ago improved from -31 per cent in June to -23 per cent in July. West Midlands consumers by comparison believed employment prospects had declined on balance with -25 per cent in June and -33 per cent in July.