UK households are experiencing a boost in disposable income as inflation on essential groceries declines.
- According to a recent report, there has been a significant 12% year-on-year increase in disposable income for August.
- The average family’s disposable income has surpassed pre-crisis levels, reaching £247 per week.
- While general inflation rates have stabilized, food and beverage inflation has notably decreased to 1.3%.
- However, the impact on lower-income households remains a concern, with slower spending power gains observed.
UK households are witnessing a welcome rise in disposable income, attributable to the easing inflation on essential groceries. This trend is highlighted in the latest Income Tracker report, which reveals a 12% increase in disposable income from the previous year, specifically for the month of August. The report underscores a five-month streak of double-digit improvements, reflecting a positive shift in spending capacity.
The average household now enjoys a disposable income of £247 per week, a figure that surpasses the pre-cost-of-living crisis peak observed in March 2021, where income was £246 weekly. This improvement marks a significant recovery from the previous economic pressures that strained family budgets.
While overall inflation levels have remained unchanged since July, there is a noteworthy decline in inflation for food and drink items, now at 1.3%. This reduction in grocery inflation is a contributing factor to the enhanced spending power observed among consumers.
Despite these promising figures, concern still looms for lower-income families who are recovering at a slower pace. On average, these households face a weekly shortfall of £66. The uneven distribution of financial relief highlights persistent economic disparities across different income groups.
CEBR senior economist Pushpin Singh expressed optimism but cautioned against premature celebrations. Singh noted that although wage growth continues to surpass inflation, the trajectory is expected to decelerate as inflation remains above the 2.0% target temporarily. “Some households may not completely overcome the cost-of-living challenges immediately,” Singh stated, emphasizing the prolonged recovery some families might face.
These developments indicate a gradual recovery in consumer spending power, with considerations for ongoing economic inequalities.
