Low and middle-income families remained under financial pressure in October, with 60 per cent of UK households seeing a fourth consecutive monthly fall in spending power, according to Asda’s latest Income Tracker.
Approximately 20 per cent of all households - typically earning £11,000 a year or less - with a £74 shortfall each week, leaving them unable to cover essential bills. Another 40 per cent of households struggled as well: those earning about £25,000 a year had only £10 left after essentials, while those on £41,000 had just £90 remaining.
Earnings growth for these households continued to lag behind rising essential costs and higher tax payments, despite October marking the first slowdown in annual inflation since May, as inflation remained well above the Bank of England target at 3.6 per cent.
Housing and utilities were again the biggest drivers of inflation, even though the energy price cap slowed gas and electricity rises. Water bills remained elevated, up 26.4 per cent on the year. Food inflation also picked up to 4.9 per cent, with bread and cereals rising 1.2 per cent month-on-month.
The essential basket tracked by Asda’s Income Tracker rose 4.6 per cent year-on-year as a result, with the Tracker showing that households aged 30-49 faced the highest essential costs (£799) and the largest monthly tax bill (£281), making them particularly exposed to rising costs.
The Centre for Economics and Business Research (Cebr), an economics consultancy which prepared the Tracker for Asda, warned that further pressures may emerge as the festive season approaches and the chancellor prepares to deliver the Budget this week.
“While the outturn inflation data for October supports Cebr’s view that inflationary pressures have peaked, there remain considerable risks to the outlook for the Income Tracker. Worse than expected labour market figures for September illustrate that the UK labour market has been weakened by raised employment costs and weak demand,” Sam Miley, head of forecasting and thought leadership at Cebr, said.
“Prospects for the UK economy are also not helped by the high likelihood of fiscal contraction in the November Budget. With households and business alike nervously waiting to see how much of the fiscal burden will be placed on their shoulders, there could well be risks ahead for the Income Tracker.”