Rising inflation is set to impact household spending this Christmas, with many families feeling the pinch, according to recent findings.
The latest Income Tracker report has highlighted a concerning trend for UK households, revealing a decrease in disposable income that could affect festive spending habits. Published by a leading supermarket, the tracker shows a reduction in household disposable income by £1.98 in October, resulting in an average of £247 available per week for families. This decline represents only the second such dip this year, marking a significant moment for financial planning amidst rising costs.
This reduction in spending power is closely tied to a 2.3% increase in inflation, primarily driven by higher energy prices. Forecasters from the Centre for Economics and Business Research (Cebr), who compile the Income Tracker data, have warned of further challenges ahead. With inflation continuing to rise, households are expected to experience a dampening of their spending capacity during the typically high-spending festive season.
The challenge is particularly acute for lower-income families, who have seen the slowest growth in disposable income since January, with an increase of just 1.6%. These households face a significant shortfall, averaging £69 per week, after accounting for bills and essential expenses. This financial strain highlights the growing disparity in financial resilience across different income levels.
Age demographics reveal disparities in the impact of inflation, with those aged 30 to 49 facing the steepest rise in essential costs, amounting to a 3.8% increase. Consequently, this age group has experienced the weakest growth in disposable income across all demographics, with only a 5.5% increase recorded in October. This reflects broader economic trends, as essential costs continue to rise.
Cebr forecasts indicate that inflation will remain above the target for the remainder of the year, suggesting sustained economic pressure. Sam Miley, Cebr’s managing economist, noted the correlation between the increased Ofgem price cap in October and rising energy costs, predicting a continuing squeeze on household budgets into the festive season. Miley commented that these factors will “lead to slightly dampened spending power over the festive period.”
In light of these financial strains, some initiatives are being introduced to alleviate social challenges. For instance, efforts to address loneliness among older individuals through grants and community initiatives have been announced, aiming to foster social connections during this challenging period.
Household spending this Christmas is anticipated to be subdued due to persistent inflationary pressures, with both energy costs and essential spending impacting disposable income. As many families brace for a financially tighter festive season, initiatives aimed at social support for the elderly provide some solace amid the uncertainty.
