UK household saving hit a record low in 2017 as inflation increased outgoings over the year.
According to the Office for National statistics (ONS), the household saving ratio fell to just 4.9 per cent from 7 per cent the previous year, meaning that households are saving the smallest percentage of their income since records began in 1963.
Total incomes grew by 3.5 per cent, while expenditure was up 3 per cent. However, inflation spiked to above 3 per cent in 2017.
The average real wage began to fall in April last year, although indications now show that pay growth is once again rising above the cost of living.
The Bank of England reported recently that the annual growth rate of unsecured consumer credit rose again to 9.4 per cent in February, including credit card borrowing rising by 9.6 per cent.
It is felt that many households in the UK have been delving into their savings over the last year in order to make ends meet.
The total household debt-to-income ratio in 2017 stood at 133 per cent, according to the ONS. The ratio had been falling steadily in the wake of the financial crisis, after peaking at 150 per cent in 2007, but has been rising again since 2015.
Economist at Deloitte, Ian Stewart, commented: ‘Household spending power has been flatlining for the last two years. That has forced consumers to run down savings and borrow more just to sustain sluggish growth in spending.
Growth in Gross Domestic Product (GDP) in the UK fell to 0.4 per cent in the final quarter of 2017, down from 0.5 per cent in the previous quarter, and now lags behind the 0.6 per cent seen in Germany, France, and the US.
Whilst that growth is equal to Canada and Japan and higher than Italy’s 0.3 per cent, it was noted by the ONS that the UK was the only G7 country to see a slowdown in its annual GDP growth rate in 2017.