Household saving ratio lowest in 50 years

Andrew Cummings
June 30, 2017

Households are facing their biggest sustained squeeze for 40 years, alarming official figures revealed on Friday.

The Office for National Statistics reported that during the first three months of 2017 the savings ratio - a measure of how much money individuals are putting away for retirement or a rainy day out of their disposable income - fell below 2% for the first time.

The latest growth estimate from the Office for National Statistics was unrevised but confirmed the slowdown from the 0.7% rate seen in the final quarter of previous year.

The figures come ahead of the Bank of England's decision in August on whether or not to hike up interest rates.

Governor Mark Carney says he is watching to see how the economy copes with the launch of Brexit talks and whether investment can help compensate for the weakness among consumers, something that did not appear imminent in Friday's data.

Darren Morgan, ONS head of GDP, said: "GDP growth for the first three months of 2017 remained unrevised at 0.2%".

"The squeeze on household spending is no surprise, given recent weak wage growth and rising inflation".

The economy's overall growth was unchanged at 0.2%, with service industries advancing just 0.1%.

On Wednesday, Governor of the Bank of England Mark Carney hinted that the continued growth in the United Kingdom economy may prove a factor in deciding whether to reverse the emergency quarter-point cut in interest rates that occurred in the aftermath of last year's referendum vote.

But the ONS added that, despite the fall in the savings ratio, individuals also spent less in the shops and on going out, contributing to a sharp fall in the growth rate from 0.7% in the last three months of 2016 to 0.2% in the first three months of 2017.

As squeezed consumers pared back spending, the largely domestic-driven United Kingdom economy slowed sharply in the first quarter of the year, the ONS also confirmed on Friday.

However, the fall in saving ratio reflected mainly the higher tax payments, driven partly by temporary factors, Mr. Bowman said, and the latest monthly trade data and surveys of export orders suggest that net trade will also start contributing positively to growth in coming quarters.

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