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Household incomes under pressure

The financial press has given much space to the potential problem for UK household income in the short to medium term as wage pressure continues and inflation remains uncomfortably high. Despite the fact that many inflationary measurements use the consumer price index, which is currently around 3.1%, a number of observers believe that the retail price index, currently approaching 4.8%, is perhaps a more realistic assessment of the situation for UK consumers. So what does this mean for UK household incomes?

In simple terms, if your income is not increasing by at least the rate of inflation, whichever way you wish to measure it, then in reality your spending power is being reduced in real terms. When you also take into account many households in the UK are seeing a reduction in their headlining income then the situation is actually worse than it seems. A survey by Markit and YouGov has also cast further doubts on the strength of household incomes with 30% of those surveyed reporting a fall in income in August and just under 50% expecting the situation to get worse before it gets better.

As we have mentioned on numerous occasions, there is the potential for consumers in the UK to literally "talk themselves into" a recession.

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