Inflation wipes out £2.3tn of non-essential income

Inflation wiped out around £2.3bn of income for non-essential items throughout April, with the UK’s less well-off households seeing their discretionary income levels fall by 12.3% .

Last month, inflation hit a 40-year high of 9%. Since then, the Bank of England has said it ‘can do little’ to prevent inflation from peaking at 10% and that ‘doomsday’ food prices are a ‘major concern’ for the UK. United.

On average, less well-off households became £59 a month poorer in April, according to research shared with FTAdviser by data analytics firm Retail Economics and money app HyperJar.

This is compared to the wealthiest households, who saw their disposable cash fall by just 1.4% in April, which equates to £61 less to spend on discretionary items per month.

For the less affluent households, inflation rates stand at 11.2% on all their expenditure, compared to 8.3% for the most affluent families in the United Kingdom.

“The country is seeing a huge income shock with less wealthy families entrenched at the epicenter,” said Retail Economics chief executive Richard Lim.

“With inflation approaching double digits, life has become extremely uncomfortable for many households.

“The most disadvantaged families are confronted with real trade-offs between the essentials to buy. There are not many cuts and purchases that can be made with inflation reaching these levels.

According to the research, one of the most significant changes identified in consumer behavior relates to their grocery shopping habits.

Spending data from HyperJar suggests that the share of grocery spending going to discounters such as Aldi and Lidl has risen 1.8 percentage points since the start of the year.

Meanwhile, the Big Four – Tesco, Asda, Sainsbury’s and Morrisons – saw spending share decline by 1.2 percentage points between January and May.

This shift in spending to discounters, according to the research, was greatest among middle-aged consumers (45-55).

Bank of England Governor Andrew Bailey told MPs last week that with Ukraine being a major exporter of grains such as barley, maize and wheat, food prices are “apocalyptic” due to the warring country’s current inability to export crops were “a major problem”. concern” for the UK.

The central bank expects inflation to average just over 10% at its peak in the last quarter of 2022.

“Many of us have never experienced a period of high inflation and it shows,” said HyperJar CEO Mat Megens.

“The Bank of England ministers and market experts are wrong in their cost of living forecasts, prices are rising and wages are not keeping up.

“Individuals can’t control this surround sound of uncertainty, but we can control what we spend and where – and try to get the most out of every penny.”