A closely-watched index has revealed that in July household spending power rose for the first time in four months.
Asda’s income tracker, which charts the amount households have left to spend once taxes and basic living costs are deducted, showed households had £1 more to spend in July compared with the same month last year.
The report, which is compiled by the Centre for Economics and Business Research (Cebr), said that families in Britain had £199 of discretionary income per week in July out of an average total income of £767. This was up 0.5 per cent from July 2016 and was the first month of growth since March.
All age groups enjoyed an increase in their income in July. The gains were sharpest in the 30 to 49 age group, where incomes have risen 2.5 per cent since last year to reach £978 per week, which the report attributed to falling unemployment.
When looking at tax and essential spending combined, the under-30s spend the most relative to their gross income, 80 per cent compared with 63 per cent for those aged 75 and over.
Asda said the under-30s spend a “substantially higher share of their income on education and housing”, with only £158 left over for discretionary spending, with growth flat over the past year.
The situation has also been difficult for pensioners. Those aged 65 to 74 have seen their discretionary incomes decline by 1 per cent over the past year to £213, while those 75 and over saw a decline of 0.7 per cent to £175. Asda said this is because older generations are struggling with interest rates of close to zero, which means income from annuities and private pensions is lower.
Older households have also been hit harder by inflation in food prices and utility bills. The “big six” suppliers all increased prices for electricity this year, some by double-digit figures. While the headline rate of inflation was 2.6 per cent in July, electricity was 9 per cent more expensive than a year before.
Kay Neufeld, senior economist at Cebr, said: “It would be too soon to announce the end of the squeeze on households. Fast-rising prices for food, clothing and electricity put family budgets under pressure. This is especially true for older households who dedicate a larger share of their expenses to essential spending and utilities.”