Households in the UK have weathered the worst of the cost of living crisis and can now expect to see their disposable income continue to rise this year, states a new report.
According to new figures from Asda’s Income Tracker, disposable income increased by 12 per cent 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 achieved in March 2021.
While inflation levels as a whole have remained unchanged since July, inflation on food and drink slowed to 1.3 per cent. With prices for essential groceries continuing to drop, households can now expect their spending power to continue to improve heading towards Christmas.
However, the data suggests that the lowest-income households 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, the firm that compiles the data for Asda, said: “Despite the recent slowdown in earnings growth, annual wage growth continues to outstrip annual growth in consumer prices. With inflation now 5 per cent 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.”
