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Disposable incomes fall to 9 year low

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31/07/2012
British households faced the lowest disposable incomes since 2005 in the first three months of this year, according to the latest data from the Office for National Statistics.

Real household income per head, income adjusted in line with inflation, fell by 0.6% in the first quarter of 2012, down to the lowest level in nine years.

On the back of falling incomes, disposable income also took a hit, with the expenditure down 0.2% – the second lowest level since the third quarter of 2003.

The increase in prices over this period has also affected the spending power of household incomes.

John Wilkinson, head of protection and investments at Nationwide, said: “The statistics are a fresh blow to cash-strapped households struggling to climb out of the economic turmoil of the double-dip recession.

“By the time they have paid their household bills and other essential items, it means they have little left to consider saving for their future, including family holidays and their retirement.”

The household saving ratio also fell by 0.5 percentage points to 6.4% in the first quarter of 2012. The household saving ratio is the amount of saving that households make in relation to its available income.

Gross household saving was £17,000m in the same quarter, down from £18,300m in the last quarter of 2011.

Despite households continuing to put money away, many are being forced to dip into their savings to make ends meet.

The ONS report also points to population growth as a factor in reducing the spread of actual income per head.

It estimated on average people have a disposable income of £273 per week, and the figures highlight that households were cutting their spending and saving levels.

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