UK households see a rise in disposable income as inflation eases.
- Asda reports a 12% increase in disposable income for August.
- Households now have higher disposable income compared to March 2021.
- Despite steady overall inflation, food and drink inflation slows.
- Lowest-income households feel prolonged impact of the cost-of-living crisis.
UK households are experiencing an increase in disposable income as inflation continues to ease. According to Asda’s latest Income Tracker, there has been a 12% year-on-year increase in disposable income for August, marking the fifth consecutive month of double-digit growth. After accounting for taxes and essential expenses, the average household now has £247 weekly disposable income, a figure that surpasses the pre-cost-of-living crisis peak of £246 recorded in March 2021.
The inflation rate as a whole has held steady since July; however, inflation specifically related to food and drink has decelerated to 1.3%. This suggests a positive trend in consumer spending power, particularly as households prepare for the upcoming holiday season. Asda anticipates that, with inflation having eased by 5% since last August, households will likely have more financial flexibility as Christmas approaches.
However, it is important to note that not all demographics are benefiting equally. The lowest-income households continue to experience difficulties, as their spending power grows at a slower pace. These households are facing an average weekly shortfall of £66, highlighting ongoing disparities in economic recovery.
Pushpin Singh, a senior economist at CEBR, notes that despite a recent slowdown in earnings growth, annual wage growth is still outpacing the growth in consumer prices. With inflation now reduced by 5% year-on-year, further increases in spending power are anticipated. However, this growth is expected to decelerate as wage growth subsides and inflation stabilises above the target level of 2%. This could mean a prolonged recovery period for some households as they strive to overcome the financial challenges of the cost-of-living crisis.
The easing of inflation brings increased disposable income, though disparities persist across different income groups.
