Spending hits five-year low

Incomes hammered as savings suffer

HOUSEHOLDS saw their disposable incomes grow just 0.2% over the summer, the Office for National Statistics confirmed yesterday.

Millions of workers are feeling the pinch because of weak wage growth.

And while other sorts of income – including interest on loans, benefits, private pensions and dividends – also grew, most are not going up as fast as inflation, which has hit 3.1%.

The slowdown is having an impact on how much people are putting away. The savings ratio, as it is known, fell from 5.6% to 5.2% in the quarter.

The other knock-on impact is that consumer spending rose just 1% year on year between July and September, the weakest growth for over five years.

This means household spending is going up faster than incomes, which has happened four quarters in a row.

The ONS delivered better news on the strength of the economy. It estimated that gross domestic product – the value of everything we produce – expanded by 0.4% between July and September. The year-on-year figure was revised up to 1.7%.

The ONS’s head of National Accounts, Darren Morgan, said: “Most of the growth came from the dominant service sector, with accounting, recruitment agencies and retailing all performing well.”

The figures come just days after the International Monetary Fund cut its outlook for UK economic growth and said the Government may be forced to make deeper spending cuts following the impact of Brexit.

Howard Archer, EY ITEM Club’s chief economic adviser, warned: “The economy is still no more than in the middle lane.”