Disposable incomes grew in November but households will feel the pinch as inflation begins to bite, say experts
Household disposable incomes have swelled by 4.5 per cent over the last year despite price inflation being at a two-year high.
Including bonuses, the average cash families have to splash out on discretionary items stood at £202, up over £9 on the previous year, according to data prepared by the Centre for Economics and Business Research (Cebr) and supermarket giant Asda.
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The government’s consumer price index hit 1.2 per cent in November, Asda said petrol prices increased by 7.4 per cent, the highest growth since July 2015.
But disposable incomes grew by virtue of falling food prices (by two per cent) and reduced mortgage repayments (down six per cent).
Read more: Long-term inflation expectations reach a two-year high of three per cent
What about 2017?
Nevertheless, economists predicted the growth in disposable cash – the third month of annual growth – was not a trend that would continue for long.
“Households’ weekly spending power is still increasing, but this might not be the case in 2017,” said Cebr economist Kay Neufeld.
The greatest danger stems from rising inflation paired with a flailing labour market. While wage growth has accelerated in the latest readings, employment growth has slowed and the claimant count is rising – an economic slowdown in 2017 could put additional pressure on the labour market
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The analysis also identified younger families’ household gross income was considerably lower than those nearing retirement.
Households under 30 received an average of £154 per week, compared with those aged between 50 and 64 receiving an average of £266 per week.