Growth in disposable income for lowest-earning households, figures suggest
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The lowest-earning households saw their disposable income grow for the first time since August 2021, figures suggest.
The disposable income for these households grew by 4.9% in February, largely driven by a continued increase in gross income and a sharp slowdown in core inflation, according to the Asda Income Tracker, compiled by the Centre for Economics and Business Research (Cebr).
However, while these households saw some “green shoots” of recovery, the figures show that their discretionary income is still negative, with their take-home pay still £68 less than the amount needed to cover bills and other essentials.
A particularly sharp uptick is expected to take place from April, when inflation will ease significantly off the back of lower household energy bills. This will help to support spending power and consumer activity
In contrast, discretionary income was £18.56 a week higher in February than a year before for the average UK household – at £231 – marking eleven consecutive months of growth.
With the exception of October 2023, this represents the strongest annual growth for the average UK household since August 2021, the report said.
Upcoming policy changes, including the reduction in national insurance contributions, uplifts to pension payments, social benefits and the national living wage were also expected to further boost household spending power in the coming months.
Despite these positive trends signalling a steady recovery, discretionary income still remained at 6.2% below its pre-crisis peak.
Sam Miley, managing economist and forecasting lead at Cebr, who produced the tracker on behalf of Asda, said: “The income tracker has been improving for almost a year now, with households continuing to recover from the depths of the cost-of-living crisis.
“A particularly sharp uptick is expected to take place from April, when inflation will ease significantly off the back of lower household energy bills. This will help to support spending power and consumer activity.”
