Latest figures from Asda’s Income Tracker suggest that rising inflation may subdue household spending this Christmas.
The tracker, which measures household disposable income, fell for only the second time this year, decreasing by £1.98 in October, leaving the average household in the UK with £247 per week.
The inflation rate rose in October to its highest figure for six months. The Consumer Prices Index (CPI) came in at 2.3%, up from 1.7% in September, driven mainly by a rise in energy bills.
The Centre for Economics and Business Research (Cebr), who produce the Income Tracker on behalf of Asda, predicts that households will now face “dampened spending power over the festive period” following earlier expectations of a better Christmas for the retail sector after cost of living pressures started to ease.
The report noted that the rising cost of essential spending will be particularly concerning for households on lower incomes heading into Christmas. These households saw the slowest growth in disposable income since January this year at just 1.6%. Consequently, their net income does not cover the cost of bills and essential spending – leaving them with an average weekly shortfall of £69.
Across age groups, those aged 30 to 49 experienced the fastest annual rise in the cost of essential spending, which increased by 3.8% to £765 in October. These households, often made up of younger families with children, face significant essential expenses, including childcare costs.
The rise in essential spending also saw these households record the weakest growth of any age group, with their disposable income only increasing at 5.5% to £298 per week in October – their weakest growth since January.
Cebr expects the inflation rate to remain above target for the rest of the year. Its Managing Economist and Forecasting Lead, Sam Miley, said: “October’s reading was only the second time this year that the Income Tracker reading has fallen on the month.
“This was largely expected, given the increase in the Ofgem price cap that took place at the start of the month, bringing higher energy bills. These increased energy prices will persist over the rest of Q4, leading to slightly dampened spending power over the festive period.”
NAM Implications:
- No surprise, given anecdotal evidence at street level.
- (with budget fallout yet to impact…)
- And the Consumer Prices Index (CPI) coming in at 2.3%, up from 1.7% in September…
- …still does not seem to be a realistic representation of all costs of living.
- Thereby depressing consumer confidence and willingness to spend…
