As you know, the UK has just sneaked out of the worst recession since the year dot, or the 1930s if you want to be pedantic. And yet data from the ONS out yesterday revealed something odd. It seems that on average, households weren’t any worse off. Is that a reason to celebrate, or to worry?

When you consider the effect on average household disposable income, it’s been a funny kind of recession. According to the ONS, between April/June 2007 and April/June 2009: “despite the increase in the households in which no one works, there was no change to average household disposable income”. Apparently, income before benefits fell by 2 per cent but was largely offset by a slight increase in cash benefits and a drop in the average level of direct taxation, due to a fall in income tax payments.

The ONS said: “Household disposable incomes, like those of corporations, have been subject to a number of opposing forces. Increasing unemployment and moderation in wage growth has constrained labour income. But because the household sector is an overall net debtor in interest bearing assets, due mainly to the large increase in secured mortgage debt built up in the last decade, the major reduction in interest rates has, in the aggregate, supported income available for consumption and investment. The taxes and benefits system has also behaved as an automatic stabilizer, protecting household incomes from some of the consequences of the weakening labour market through lower taxes and higher benefit payments.”

You may recall, the story during the boom was close to the precise opposite. In 2007, for example, Ernst & Young brought out a report saying that discretionary disposable income (that’s income we have left over after spending on things we have no control of, such as petrol, council tax, utility bills, rent/mortgage) actually fell in percentage terms between 2003 and 2007. It said that in 2007 the average household had £909.84 in discretionary disposable income. In 2007, the figure had fallen to £772.79. (See: You have never had it so good – well, actually, you have http://www.investmentandbusinessnews.co.uk/iabn/you-have-never-had-it-so-good-well-actually-you-have/.)

So what’s been going on?

The answer, of course, lies with borrowing. During the boom we borrowed, hand over foot. And the flip side of that, the inevitable consequence of rising borrowing, is that we saved less. In fact, on the eve of the recession, in Q1 2008, the household savings ratio was minus 0.9.

Since then, savings rates have shot up, peaking at 8.5 per cent in the third quarter of last year.

And why is that? First of all we haven’t had much choice in the matter. Banks have been less willing to lend. Secondly, there has been a certain amount of waking up to reality. The baby boomers are slowly beginning to realise they need to save a lot more; unless, that is, they are willing to work right up to the moment Mr Death comes calling. (There are parallels here with Japan. People come up with all sorts of reason to explain Japan’s poor economic performance for the last 20 years, but the real reason for this is that the ageing population, worried about their retirement, have been doing the one sensible thing, and saving more.)

Maybe the switch towards saving is a cultural thing, too. During the noughties spending was the fashion, debt didn’t matter. Today, that old saying “neither a borrower nor a lender be” seems to be back in fashion.

But surely the key factor lies in the massive dent to confidence suffered by the British public. During the boom there was a lot of head-burying in the sand going on. It was just assumed the good times would last for ever, and those who predicted falls in house prices were laughed at.

The real charger of the noughties boom was surely surging house prices. Home-owners felt they had a safety net. They could put it on their credit card, and if things got tight, well, there was always the option of topping up the mortgage.

Now, consumers are saving. This is a perfectly logical thing to do. But as a result of rising savings, consumer spending is beginning to wilt.

This morning the latest consumer confidence index from the Nationwide was released. The index was down again, falling to 56, from 63 in the previous month. More to the point, the July reading has fallen for three consecutive months and it now stands at a similar level to May 2009. The consumer expectations index fell even more sharply.

It is no wonder that the latest index from the British Retail Consortium (BRC) tracking retail sales dipped in July too. According to the BRC, UK retail sales values rose by just 0.5 per cent on a like-for-like basis from July 2009. Stephen Robertson, Director General, British Retail Consortium, said: “These are poor results for non-food retailing.” Food sales remain strong, so maybe distressed consumers are comfort eating. However, BRC data is extremely volatile. In the previous month it had sales up 1.2 per cent, but in April had them down 2.3 per cent. There is a clear trend implicit in the consumer confidence index – it has been steadily falling, With the BRC data it is hard to pick out a trend at this stage.

Maybe the big difference between this recession and the last one – which wasn’t so bad, but felt awful – was the housing market. In the early 1990s, house prices crashed, negative equity soared, and if you are of a certain age, and were new to owning a property then (as was the author of this piece), it was really painful.

Just as the recent downturn was a funny kind of terrible recession, because despite its severity households have not suffered so badly, the downturn of the early 1990s was a funny kind of mild recession, because it felt like something out of a nightmare.