Families are OFFICIALLY suffering the worst squeeze on record: Household incomes tumble for four quarters in a row for the first time since 1955
- Real household disposable incomes have now fallen for four quarters in a row
- It is the first time that has happened since official records began back in 1955
Families are officially suffering the worst squeeze on record after real disposable incomes fell for the fourth quarter in a row.
Finances failed to keep up with soaring inflation once again at the start of the year, making it the longest sequence of drops since official figures started being compiled in 1955.
Real household disposable income was down 0.2 per cent between January and March, as income growth of 1.5 per cent was outstripped by household inflation of 1.7 per cent.
Household finances have now been under pressure for a straight year with costs of energy, food and other goods spiking after Covid and with the Ukraine crisis raging.
The latest figures came as the ONS confirmed its earlier estimation that GDP rose by 0.8 per cent in the first quarter of the year – although it is since believed to have stalled.
Real household disposable income was down 0.2 per cent between January and March, as income growth of 1.5 per cent was outstripped by household inflation of 1.7 per cent. It is the longest sequence of drops since official figures started being compiled in 1955
This marked a decline in growth from 1.3 per cent in the previous three months, but means GDP remains 0.7 per cent above the last quarter of 2019, before the pandemic struck.
Darren Morgan, director of economic statistics at the ONS, said: ‘Our latest estimate for economic growth in the first quarter is unrevised as a whole, showing the UK continued to recover from the pandemic.
‘Both household incomes and spending rose in cash terms in the first quarter, leaving the rate of saving unchanged.
‘However, once taking account of inflation, incomes fell again, for the fourth consecutive quarter.’
The more detailed GDP breakdown also shows that business investment fell by a downwardly revised 0.6 per cent at the start of 2022, leaving it 9.2 per cent below its pre-pandemic level.
There are mounting fears that the cost-of-living crisis could tip the UK into recession – as defined by two quarters in a row of falling output – as rocketing inflation sees households and businesses rein in spending.
Inflation has already reached a 40-year-high of 9.1 per cent and is set to rise past 11 per cent in the autumn.
Bank of England Governor Andrew Bailey said last night that soaring inflation will hit Britain harder than any other major economy during the current energy crisis and that output is likely to weaken earlier and be more intense than others.
On a month-on-month basis, GDP is already starting to show the impact of the cost crunch, with recent figures showing output fell in both March and April, by 0.1 per cent and 0.3 per cent respectively.
The economy is expected to shrink overall in the second quarter and experts are concerned the autumn jump in the energy price cap could lead to falling output in the following three months.
Martin Beck, at the EY Item Club, said: ‘The squeeze on household spending power has further to run, with the second quarter having seen both the energy price cap increase by more than 50 per cent and a rise in personal taxation, while a further large rise in the energy price cap looking likely in October.
Boris Johnson (pictured at the NATO summit in Madrid today) revealed he has held talks with fellow world leaders on removing trade barries, with oranges and bananas among the produce that could be made cheaper
‘So, with savings rates already below ‘normal’ levels, hopes of avoiding a consumer recession rest on households who accumulated ‘excess’ savings during the pandemic spending a good amount of those funds.’
Other ONS data showed Britain’s current account deficit – the difference between the value of the goods and services the UK imports and the goods and services it exports – widened to a record £51.7billion, or 8.3 per cent of gross domestic product.
This was the biggest shortfall since records began in 1955, according to the ONS.
But it issued a warning over the figures, saying there was an impact of changes in post-Brexit data collection on trade in goods imports and foreign direct investment, which it is investigating.
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