Fears about the job market intensified in July, according to the latest Lloyds TSB consumer confidence barometer.

Although official employment data remains strong, consumers are increasingly feeling less secure in their jobs, the survey of 2,000 people found.

The balance of respondents that believed employment prospects are better now than 12 months ago 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 2007, when the balance was -17 per cent, Lloyds TSB said.

Trevor Williams, chief economist for Lloyds TSB corporate markets, said: “The combination of falling employment confidence and rising inflation expectations is a lethal cocktail for consumer spending.

“The survey results suggest that spending growth is likely to slow sharply in the months ahead. If people don’t feel safe in their job and high prices are putting incomes under pressure then demand for discretionary purchases will naturally slow.”

Consumer inflation expectations also 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.

However, with consumers expecting the worse, this could give the Bank of England’s monetary policy committee (MPC) some room for manoeuvre, Mr Williams added.

“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,” he said.