Disposable income increased but spending remains down

By Lucy Bower

Households are spending £12 billion less than before the recession, reports The Telegraph, even though figures from the Office of National Statistics (ONS) revealed that the population's disposable income rose by £4 billion between early 2010 and September last year. Actual spending only rose by a quarter of that amount.

Just this week, the Director General of the British Retail Consortium, Stephen Robertson, said that people are put off shopping because they have money worries and less job security.

Today's ONS report discloses that people were already cutting back on spending before the recession even happened - household spending peaked at the end of 2007, a full two quarters before the UK entered recession. We were officially in recession between quarter two in 2008 and quarter two of 2009. Since that spending peak in late 2007, household spending has declined by £12 billion, even though disposable income is at a similar level.

It seems that even though the recession is behind us, people are buying fewer "semi-discretionary" big items like cars, although the report says people are willing to spend where they see "value for money".

A spokesperson for Think Money commented: "In many cases, people are shopping less because they are choosing to use their disposable income to repay debts and save for the future."

"While there are concerns about the economy, every individual has a responsibility to themselves to secure their own financial futures. Clearing debts and saving are two practical ways to do so."

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Tags: disposable income, income, ONS, Office of National Statistics, 2010, 2011

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