Asda’s latest Income Tracker shows that disposable incomes fell for 60% of UK households last month, with the first decline for middle-income families since September 2023.
The contraction follows a sharp rise in inflation, which reached 3.8% in July – the highest level so far this year – driven by sustained increases in the cost of essentials such as food, drink, and transportation.
Middle-income households (with approximately £41,000 in gross annual earnings) saw their disposable income decline by 1.6% in July, while lower-income households experienced an 11.1% drop, resulting in a shortfall of £73 per month between earnings and essential spending.
Although higher-income households remain more insulated, with income growth still outpacing rising costs, the gap is narrowing.
The report notes that as earnings growth begins to ease and tax contributions rise, all households are likely to feel the squeeze in the months ahead, with inflation expected to stay above the Bank of England’s 2% target well into 2026.
Sam Miley, Head of Forecasting and Thought Leadership at Cebr, the firm that compiles the data, commented: “Inflation accelerated to 3.8% in July, the highest rate since January last year. The rise was driven primarily by sharp price increases in essentials, such as food and non-alcoholic beverages.
“This has been reflected in the Income Tracker, which showed only modest growth of 2.4% in the year to July. While wages are expected to rise over the remainder of the year, persistently high inflation will put continued pressure on purchasing power, weighing on further gains in the Tracker.”
NAM Implications:
- In other words, not good.
- i.e. anticipate impact on the level of demand, especially food & drink…
- …with more Autumn Budget taxes to come.
- Therefore, consumers shopping for value…
- i.e. Moving from mults to discounters.
- i.e. Moving from brands to own label equivalents.
- With little/no let-up via positive moves by the government…