From Morningstar: 2024-05-17 05:37:00

The Resolution Foundation noted that the UK’s cost-of-living crisis has transformed the nation into savers rather than spenders. Despite incomes falling, consumption has been cut even more. Inflation data next week is expected to be close to the 2% target, signaling the end of a three-year inflation spike.

Households have dramatically reduced spending during the cost-of-living crisis, with essential items seeing a rapid rise in prices. Real household disposable income per person has fallen by £280 annually, while real consumption per person has dropped by £1,200. Families saved 6% of their disposable incomes in the last quarter of 2023, the highest rate in over 30 years.

The recent easing of the squeeze saw UK households spending their financial windfall from falling energy prices on going out or traveling abroad. Additionally, the nation has deviated from the historical trend of inflation shocks reducing national debt, with public sector net debt increasing due to household support spending. The impact of the inflation shock is expected to have a long-lasting effect.



Read more at Morningstar: How Inflation Changed UK Saving and Spending Habits