Disposable income declined for 60% of UK households in August, according to new data from Asda’s income tracker.
The tracker highlighted that the gap between income and everyday costs was widening, particularly for lower-income households, who face a shortfall of £74 per week between earnings and what they need to spend on everyday essentials.
Inflation remained high at 3.8%, marking its joint-highest level since January 2024. Food and non-alcoholic drink prices rose for the fifth month, reaching 5.1%, its highest level since January 2024.
Low-income households were hit the hardest, with disposable incomes falling by 3.2%, 31.8% and 3.2%, respectively across the bottom 60% of earners.
Middle-income households saw income fall for the second consecutive month, with further declines expected if inflation continues.
High-earning households saw wage growth outpace inflation, shielding them from the cost of living pressures.
Cebr, which produces the income tracker on behalf of the supermarket, warned that if the current trajectory continues, the UK risked evolving into a ‘dual-speed’ economy, where earnings growth remains strong for the highest earners, but the lowest earners see their incomes flatline.
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Cebr head of forecasting and thought leadership Sam Miley said: “The income tracker showed its weakest annual growth in over two years in August, as inflation remained sticky at nearly twice the Bank of England’s target.
“The fact that inflation is concentrated in essential spending categories is bad news for consumers, who are seeing more of their post-tax income covering food and household bills.
“Looking ahead, there is a risk that the income tracker starts to decline as we head into the crucial fourth quarter, presenting a risk to business health too.”
Earlier this month, the British Retail Consortium (BRC) reported that consumer confidence fell in September, amid fears over the state of the UK economy and the potential of higher taxes.
Expectations for the state of the overall economy dropped from -32 in August to -36 in September, according to the trade association.
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