Monthly incomes £22 lower in 2012
The average monthly income of UK households fell by £22 in real terms compared with last year, according to a survey carried out for the Bank of England (BoE) by NMG Consulting.
People on lower incomes have seen their income eroded more than higher earners and households still have high levels of debt the BoE reported.
The survey, which was published by the BoE in its latest Quarterly Bulletin, found that the 62 per cent of households in the lowest income bracket had suffered a fall in after-tax income in the past year, compared with 48 per cent of those in the highest income bracket.
Average monthly pre-tax incomes fell by £43 to £2,627 this year, more than offsetting growth in wages, which were estimated to have increased by just 1.3 per cent in October.
CPI inflation of 2.2 per cent, higher VAT, rising food and energy costs and more expensive imports, all increased the pressure on household incomes.
The survey identified high levels of household debt, with 35 per cent of households reducing their spending due to debt worries.
Economists suggest that inflation could rise to over 3 per cent next year, as the effect of higher fuel prices kicks in.
Speaking to The Telegraph, Howard Archer of IHS Global Insight, said: “It still looks very possible that increased energy tariffs and higher food prices could push consumer price inflation up to 3pc early in 2013 and keep it there for a while.
“Further utility price hikes will kick in during December and January.”
A separate survey by Lloyds TSB also found that inflation is eroding household incomes.
In November, inflation rose 0.1 per cent faster than the earnings of its current account customers, the bank said.
Lloyds TSB customers are estimated to have seen their annual spending power fall by £11.