Saturday, July 01, 2017

The Squeeze

Savings ratio at record low as disposable income drops. The savings ratio - which measures the outgoings and incomings that affect households - has been falling sharply for more than a year. The amount being set aside as savings has now slipped to just 1.7% of disposable income – the lowest level on record, and a fraction of the near-10% average for the last 50 years. Just a year ago, it was more than three times the current rate.

Frances O'Grady, general secretary of the TUC, said: "These figures make for grim reading. People raiding their piggy banks is bad news for working people and the economy. But with wages falling as living costs rise, many families are having to run down their savings or rely on credit cards and loans to get through the month. With household debt now at crisis levels, we urgently need to create better paid jobs."

For the first time since the 1970s, disposable income has fallen for three quarters in a row, the first time this has occurred since the International Monetary Fund had to bail Britain out in 1976. Real household income in the UK – a measure of spending power adjusted for movements in prices – fell by 1.4% in the first three months of 2017, following falls of 0.3% in the third quarter of 2016 and 0.4% in the fourth quarter.

Concerns have also been expressed about the level of consumer borrowing on loans, credit cards, overdrafts and car finance. Ffigures showed an unexpected jump in consumer credit. Households borrowed an extra £1.7bn in May - £300m more than had been expected.

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