Household income falls at fastest pace for five years

Household income adjusted for inflation fell at its fastest pace for more than five years at the start of 2017 as soaring prices squeezed budgets.

The latest official figures revealed that real household disposable income per head dropped by 2% year-on-year in the first quarter - the steepest decline since the end of 2011.

The Office for National Statistics (ONS) said the drop was driven by surging inflation as the Brexit-hit pound has sent the cost of imported goods and services soaring.

This has put consumer finances under pressure as inflation outstrips weak growth in wages.

Real household disposable income per head has now fallen for three quarters in a row, which marks the first time since the last long run in 2013.

But the ONS said the wider measure of net national income per head rose 4.3% year-on-year as the weak pound boosted earnings on overseas investments by £6.9 billion.

Cash-strapped consumers also appeared optimistic over their economic well-being in spite of the inflation squeeze, reporting an improvement in how they see their own financial situation and the general economic picture over the last year.

Dominic Webber, head of economic well-being at the ONS, said: "With prices rising and wage growth still modest, real household disposable income per head has now fallen at its fastest rate in over five years.

"In contrast, however, net national disposable income per head - which better represents all the income in the economy available to spend or save - has increased sharply.

"This is due to a £6.9 billion increase in the UK's foreign earnings, driven in part at least by the devaluation of sterling."

The ONS's well-being data showed that gross domestic product (GDP) per head remained flat quarter-on-quarter and 1.3% higher year-on-year.