Millions of Britons are feeling the pinch in higher mortgage rates, energy and food costs, and the big question being asked from City dealing rooms to sitting rooms is whether the party is truly over.

The peak of the consumer boom passed in the late Nineties, when household spending was growing at 4.5 per cent a year or more. In 2005 and 2006 spending rose by 1.5 per cent and 1.9 per cent. Last year it was a more robust 3 per cent but still much weaker than in the peak years.

Now, however, Britons are feeling a severe financial squeeze, sparking speculation that, as memories of the carefree spending boom fade, the country may face a much more marked consumer bust as economic downturn changes a nation that was cavalier over its spending into one of fretful, canny savers.

Households are being hit hard by sliding house prices, soaring food and energy bills, subdued income growth and higher taxes. As the cost of living climbs and property values tumble, consumer confidence has wilted, with the headline gauge of sentiment from GfK, the market research and information services group, at its weakest since late 1992, at the end of the most recent recession.

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There are few doubts about the scale of the pressure on consumers. Food prices – propelled by surging demand in emerging-market nations and the impact of a falling pound on import bills – are rising at an annual rate of more than 9 per cent. Record oil prices, which have more than trebled since 2003, are driving up both the price of fuel and utility bills. Domestic energy prices are up 9 per cent in a year, petrol prices by 18 per cent.

Household incomes grew at an anaemic pace of 1.2 per cent last year, after inflation, and are tipped to grow by as little as 1 per cent this year. Households are also burdened by debt piled up in the carefree years, with interest bills now taking 10 per cent of incomes and total repayments 23 per cent. Even for those consumers with an appetite for further borrowing, the credit crunch means that loan rates are rising, despite the Bank of England’s cuts in base rates, while hundreds of thousands of people coming off cheap, two-year fixed-rate mortgage deals face higher repayments.

Falling house prices, meanwhile, are taking a toll of household wealth. The Bank plays down the direct link from house price falls to weaker consumer spending, but the slump in the housing market batters economic confidence and eats into the collateral against which individuals can borrow. Mortgage equity withdrawal – borrowing against the value of a property to release cash – is on the wane.

But what will be the real toll of this catalogue of misery on consumer spending? The evidence is mixed. Although there are mounting signs that anxious Britons are curbing spending, gloomy surveys of high street sales from the CBI and the British Retail Consortium (BRC) clash with more upbeat official figures, although these are questioned by the City and the Bank. Last week official figures showed that overall household spending (on services and goods) rose by a hefty 1.3 per cent in the first quarter, rebounding from a gain of a meagre 0.1 per cent in the previous three months.

Retail sales in April, on the official figures, were boosted by runaway sales of the computer game Grand Theft Auto IV. Yet the volumes of goods sold still fell by 0.2 per cent for the second month in a row, marking the first back-to-back drop for more than two years.

Better May weather has made for brighter trading times for some retailers. Debenhams spoke last week of “fantastic” conditions. Some economists, such as Stephen Lewis, of Monument Derivatives, also believe that the grim falls in spending shown in surveys such as the BRC’s may be exaggerated by their focus on so-called like-for-like sales, which adjust for increasing retail floorspace. By expanding their shops, retailers may be “cannibalising” their own sales, Mr Lewis says.

Yet many analysts believe that any residual resilience in consumer spending in recent months cannot last. Signs of strength, they argue, are likely to prove the last gasp of a boom that has long been on life support.

The pessimists may have a point, because the pressures on households are set to intensify in coming months.

The Bank is forecasting at least another 15 per cent rise in utility bills over the summer, while all but ruling out further interest rate cuts. Oil prices set new highs, above $135 per barrel, last week. House prices are tipped to continue tumbling and unemployment has started to creep up.

There is evidence that consumers are avoiding treats in favour of essentials. Industry surveys suggest that restaurants, bars and hotels are bearing the brunt as Britons opt for a cheap evening in rather than a big night out. If tough times have arrived for the hospitality sector, many economists believe that they can only beckon for the rest of the high street.

The average City forecast is for consumer spending to grow by only 1.5 per cent this year and 1.3 per cent next, although some big institutions have forecast spending growth of as little as 0.6 per cent in 2008 and maybe even less in 2009.

For those Britons who still managed to make it to a bar or a restaurant over the Bank Holiday weekend, there may have been little to toast but plenty to lament.

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