Rising inflation is expected to impact household spending this Christmas, as indicated by recent data.
According to the latest Income Tracker by a major UK supermarket, the cost of living has led to a significant decrease in disposable income for households. Specifically, October saw a decline of £1.98, leaving the average family with £247 per week. This change marks only the second decrease recorded this year and is attributed primarily to a 2.3% inflation increase driven by rising energy costs.
The Centre for Economics and Business Research (Cebr) anticipates that this trend will continue to affect consumer behaviour over the festive season. Reports suggest that lower-income families have faced the slowest growth in disposable income since January, seeing only a 1.6% increase. Many in this group find their net income insufficient to cover essential expenses, resulting in an average shortfall of £69 weekly.
For those aged 30 to 49, there has been a 3.8% rise in essential living costs, reaching £765 in October. This demographic has subsequently experienced the weakest growth in disposable income across all age groups, with only a 5.5% increase to £298 weekly, marking the slowest growth since the beginning of the year.
Sam Miley, Cebr’s managing economist, noted the correlation between the October drop in the Income Tracker and the new Ofgem price cap, which led to increased energy bills. These elevated costs are expected to persist throughout the remainder of the fourth quarter, likely reducing the spending power during the holidays.
In response to these economic challenges, the supermarket has committed to allocating nearly £1 million in grants and in-store initiatives to support the elderly population, particularly those over 60, by addressing loneliness during the holiday season.
The economic pressures of rising inflation and energy costs are poised to influence how UK households manage their budgets this Christmas. While some groups are more affected than others, the overall trend suggests a cautious approach to spending in the coming months.
