UK disposable income edges up, but young and poorest lag, says ASDA

Core Insights - Young adults and the UK's lowest-income households remain financially worse off compared to pre-cost-of-living crisis levels, despite a slight increase in average disposable income in January 2026 [1] Group 1: Household Income and Spending - Average household spending power increased by £4.24 year-on-year in January, reaching £261 per week after essentials [2] - Total average household income was £1,067 weekly, with £649 allocated to essential outgoings and £157 to taxes [2] Group 2: Discretionary Income Trends - Individuals under 30 and those aged 30-49 experienced declines in discretionary income, remaining below pre-crisis levels, with younger adults having £175 per week available compared to £195 in March 2021 [3] - The lowest-earning fifth of households faced a £71 shortfall between income and essential costs in January, with an estimated decline of £1.91 per week compared to the previous year [4] Group 3: Income Disparity and Inflation - The purchasing-power gap between the richest and poorest households widened by £18.89 year-on-year [5] - Inflation rates for food and non-alcoholic beverages moderated to 3.6%, while housing and utilities costs rose by 4.5% year-on-year [5] Group 4: Future Outlook - Inflation is expected to approach the Bank of England's 2% target by the second half of 2026, which may support discretionary income growth, although weaker earnings growth could offset some gains [6] - The Asda Income Tracker indicates that nominal discretionary incomes have seen modest year-on-year growth, primarily due to slowing inflation [7]