New Income Tracker stats from Asda found that disposable income had increased year-on-year – but low-income families will continue to feel the effects of the cost-of-living crisis
British households have weathered the worst of the cost-of-living crisis and can now expect to see their disposable income continue to rise this year.
New figures from Asda’s Income Tracker found disposable income increased by 12% year-on-year in August, the fifth consecutive month of double-digit growth. After taxes and essential spending, the average UK household had a disposable income of £247 per week last month, surpassing the pre-cost-of-living crisis peak of £246 per week seen in March 2021.
While inflation levels as a whole remain unchanged since July, inflation on food and drink slowed to 1.3%. Prices for essential groceries are continuing to drop as inflation on these items eases, so UK households can now expect their spending power to continue to improve.
Inflation has also dropped by 5% since last August, and combined with the steadying of spending power, the average UK households will now likely have more cash in their hands in the run-up to Christmas. However, lowest income families will continue to feel the impact of the cost-of-living crisis for a little longer.
The spending power of these households is increasing slower than others, meaning for many people, their net income does not cover bills and essential spending – leaving them with an average weekly shortfall of £66.
Pushpin Singh, Senior Economist at Cebr, said: “Despite the recent slowdown in earnings growth, annual wage growth continues to outstrip annual growth in consumer prices. With inflation now 5% lower year-on-year, further increases in spending power are expected in the coming months.
“That said, growth in spending power is expected to slow as wage growth eases further and inflation remains sticky at a level above the 2.0% target for some time. This could mean some households will take longer to fully escape the effects of the cost-of-living crisis.”
