Incomes rise but Brits save instead of spend
REAL income levels improved for UK households in the second quarter of the year, according to data released yesterday by the Office for National Statistics (ONS).
Yet austerity-minded Britons opted against increasing their spending in light of the extra funds, instead opting to add to their savings.
Allowing for inflation, household actual income per head rose by 1.6 per cent in the three months to June, meaning that people had an extra £69 in their pockets.
While this was the highest level since the final months of 2010, it remains 2.9 per cent below the peak levels seen in mid-2009, according to IHS Global Insight economist Howard Archer.
“Consumer spending caution is likely to be reinforced by still appreciable concerns over the economic outlook,” Archer said.
Consumer spending per head dipped by £7 in the second quarter, a decline of 0.2 per cent compared to the first three months of the year.
Instead of splashing the cash on the high street, people chose to put it aside for a rainy day. The household saving ratio grew by 0.7 percentage points to 6.7 per cent in quarter two, the ONS said.
“The hair shirt could soon be declared national dress,” commented financial adviser Phillip Bray, of Investment Sense. “Britons may have got richer in quarter two, but we didn’t feel it – and we certainly didn’t spend like it.”
Bray added: “There’s a danger that such reluctance to spend could become a self-fulfilling prophecy – and the economy may grind to a halt as a result.”
A separate study by Lloyds TSB said that real discretionary spending power fell 0.9 per cent last month, having risen in the previous three months – suggesting that households’ income levels remain in choppy waters.