Disposable income for low-earning households hits 3-year high, Asda finds

Disposable income for low-earning households hit a near three-year high in May, following a 12.6% increase year-on-year, Asda’s income tracker has revealed.

Despite this increase, budgets for these families remain under pressure in real terms, as their take home pay was still not enough to cover bills and essential spending, leaving them with an average weekly shortfall of £66. 

Asda’s income tracker also shows that disposable income for the average UK household reached its highest level since September 2021, a period of 32 months.

The average UK household was £31.33 per week better off in May compared to the same period a year earlier following a 15.1% rise in disposable income to £239 per week. This marks the second consecutive month of double-digit annual growth.

A key driver behind the improvement in household spending power continues to be deceleration in inflation, with annual inflation reaching the Bank of England’s (BoE) 2.0% target for the first time in over two years.

The deceleration in consumer price levels, complemented strong income growth, with key household categories including food, drink and clothing, recording notable slowdowns.

As a result, all UK households recorded record monthly improvement in annual growth in spending power. Disposable income for the highest earning households has also now exceeded the pre-cost-of-living peaks.

Reacting to this month’s income tracker, Pushpin Singh, senior economist at Cebr, said:

“The income tracker continues to improve, with discretionary income increasing to £239 per week. This improvement continues to be driven by several factors, not least elevated nominal earnings growth, easing inflation, the uplift in the National Living Wage, and tax policy changes. 

“Cebr anticipates spending power to see further improvements in 2024, bolstered by the relatively strong growth momentum seen in Q1 2024.”