Rising inflation is expected to impact household spending this holiday season, as highlighted by Asda’s recent Income Tracker findings.
- Household disposable income has decreased in October, leaving UK families with reduced weekly budgets.
- Inflation, driven by higher energy costs, suggests diminished purchasing power during the festive period.
- Lower income households face a significant shortfall, struggling to cover essential expenses and bills.
- Middle-aged consumers experience increased essential spending costs, affecting their financial stability.
According to Asda’s latest Income Tracker, the rise in inflation is likely to affect household spending in the UK this Christmas. The tracker, which monitors household disposable income, saw a decrease in October by £1.98, leaving the average UK household with £247 per week. This marks only the second time this year that such a fall has occurred.
The current inflation, which has risen by 2.3%, is primarily driven by an increase in energy prices. These higher costs are expected to persist, leading to reduced spending power over the festive season. This is echoed by the findings of Cebr, which produces the tracker for Asda, as they predict a “dampened spending power over the festive period”.
Lower income households are experiencing a particularly challenging time, with their disposable income growing at a slow rate of just 1.6% since January. Their financial situation is dire, as their net income cannot cover the cost of bills and essential expenses, resulting in an average weekly shortfall of £69.
For those aged 30 to 49, the cost of essential spending has rapidly increased, with a 3.8% rise recorded in October. This age group now faces the slowest income growth since the beginning of the year, with disposable income growing by only 5.5% to £298 per week.
Sam Miley, a Cebr managing economist, noted that the drop in the October Income Tracker was anticipated due to the increase in the Ofgem price cap, which introduced higher energy bills. These elevated energy costs are expected to continue through the fourth quarter, diminishing spending capability during the holiday period.
With inflation influenced by rising energy costs, UK households may need to adjust their holiday spending plans.
