Household budgets to recover in 2013


The pressure on family budgets will ease next year as inflation falls and tax-free personal allowances go up according to predictions by the Centre for Economics & Business Research (CEBR).

The report predicts that disposable income will rise faster than prices for the first time since 2010 allowing families to ‘recover their spending power’ as their budgets stretch further in 2013.

Inflation has already fallen from 5.2% in September last year to 2.4%, with the CEBR predicting a further fall to 1.6% next spring.

Author of the report Scott Corfe, said the weak global economy came with one benefit for consumers – falling inflation. “Slowing price growth will boost household spending power and also give the Bank of England room for manoeuvre in keeping interest rates on hold until 2016,” he said.

However, he also added that consumers had been hit hard by declining living standards over the last few years.  Despite the report’s encouraging predictions of growth, real disposable incomes aren't expected to surpass their 2010 peak level until 2015.

Consumer confidence is expected to increase next April when the Income tax-free personal allowance increases from £8,105 to £9,205 – a boost of £1,100 which will help struggling families.  

CEBR’s head of macroeconomics Charles Davis said:

“Economic indicators are starting to show the squeeze on household spending power coming to an end. This process is likely to continue over the coming quarters, with some reasonable growth in spending power come next year."The report predicts that disposable income will rise faster than prices for the first time since 2010 allowing families to ‘recover their spending power’ as their budgets stretch further in 2013.

 


  • Date posted:
    06/08/2012
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