Consumer price inflation may have dropped to 4.2% in the UK, but average earnings are rising at only 1.9% according to figures from the Office of National Statistics. With wages failing to keep pace with prices, it comes as no surprise that consumers are having to deplete their reserves. The latest figures from the Building Societies Association reported that savers raided £100 million from their accounts in December. Consumers on the other side of the Atlantic appear to be engaging in a similar tactic. Over the past year, the savings rate in the US has fallen from 5.2% to 4.0% of disposable income.
Of course, some of the decline in savings could reflect households being canny with their money. Low interest rates mean it is often far more practical to pay back expensive debts. The Bank of England reported that consumers repaid £377 million in credit in December. Taken together, the outlook for retailers in 2012 could be challenging, particularly if wage growth remains anaemic and inflation persists at elevated levels.