Millions of households are having to cut back due to soaring inflation
(Picture: PA Wire)Millions of families across Britain have seen their disposable incomes squeezed for a year as the cost-of-living crisis grows, according to official figures.
They showed that real household disposable income fell by 0.2 per cent in the three months to March.
Nominal household gross disposable income grew by 1.5 per cent, the data from the Office for National Statistics showed.
But this was offset by quarterly household inflation of 1.7 per cent.
ONS Director of Economic Statistics Darren Morgan said: “Our latest estimate for economic growth in the first quarter is unrevised as a whole, showing the UK continued to recover from the pandemic.
“Both household incomes and spending rose in cash terms in the first quarter, leaving the rate of saving unchanged.
“However, once taking account of inflation, incomes fell again, for the fourth consecutive quarter.”
The latest figures came as the ONS confirmed its earlier estimation that gross domestic product (GDP) rose by 0.8 per cent in the first quarter of the year.
This marked a decline in growth from 1.3 per cent in the previous three months.
The more detailed GDP breakdown also shows that business investment fell by a downwardly revised 0.6 per cent at the start of 2022, leaving it 9. 2 per cent below its pre-pandemic level.
There are mounting fears that the cost-of-living crisis could tip the UK into recession - as defined by two quarters in a row of falling output - as rocketing inflation sees households and businesses rein in spending.
Paul Dales, chief UK economist at Capital Economics, said: “The final Q1 GDP data leave households looking a bit more vulnerable to the big fall in real incomes that’s going to hit in Q2 and Q3. Although GDP and consumer spending won’t fall as far as real incomes, it’s pretty clear that the economy is going to be very weak for a while. A recession is a real risk.”
Inflation has already reached a 40-year-high of 9.1 per cent and is set to rise past 11 per cent in the autumn.
On a month-on-month basis, GDP is already starting to show the impact of the cost crunch, with recent figures showing output fell in both March and April, by 0.1 per cent and 0.3 per cent respectively.
The economy is expected to shrink overall in the second quarter and experts are concerned the autumn jump in the energy price cap could lead to falling output in the following three months.
ONS data also out on Thursday showed Britain’s current account deficit - the difference between the value of the goods and services the UK imports and the goods and services it exports - widened to a record £51.7 billion, or 8.3 per cent of gross domestic product.
This was the biggest shortfall since records began in 1955, according to the ONS.
But it issued a warning over the figures, saying there was an impact of changes in post-Brexit data collection on trade in goods imports and foreign direct investment, which it is investigating.
Mr Morgan said: "While today’s figures are showing a very high balance of payments deficit, changes to the way EU imports are recorded, and challenges in collecting inward investment data, mean there is a higher degree of uncertainly with these numbers than usual."
