November’s inflation increase impacts Christmas budgets, even with higher disposable income than last year.
- Inflation rose for the second month, climbing to 2.6% in November.
- Household disposable income saw a year-on-year rise, improving spending power.
- Despite increased income, Christmas spending remains subdued compared to pre-pandemic times.
- Energy prices and wage growth are key contributors to future inflation trends.
In November, inflation displayed a noticeable uptick, as the Consumer Price Index accelerated to 2.6%, marking the second consecutive month of rising inflation rates. This increase is expected to restrict holiday spending, a concern echoed by Asda based on their recent Income Tracker findings. Households are currently navigating a landscape of heightened inflationary pressures, as energy prices and wage growth fuel higher essential costs.
Despite facing these inflationary challenges, disposable income has seen positive growth. Asda’s data indicates that in November, average household disposable incomes increased by 10.5% from the previous year, the sixth month of continuous double-digit growth. On average, UK households were £23.74 better off per week than they were a year ago, having £249 weekly left after covering essential expenses.
Sam Miley, managing economist at Cebr, highlighted the mixed economic signals, stating, “The Income Tracker saw a slowdown in growth in November, driven by accelerating inflation. That said, spending power has continued to increase, with the Tracker having exhibited double-digit growth for a sixth consecutive month.” While spending power has improved, consumer expenditure for Christmas is expected to be cautious, remaining below pre-pandemic levels due to persistent inflation and remnants of the cost-of-living challenges.
Looking ahead, the inflation outlook remains concerning with expectations of it staying above the 2% target. This is largely attributed to unstable energy costs and ongoing wage increases, which are anticipated to drive further inflationary pressure in the coming months. Asda’s analysis underscores a period of economic adjustment where, despite better incomes, households might limit festive expenditure due to these pressures.
Inflationary pressures remain a significant factor, potentially curbing holiday spending despite increases in disposable income.
