- Average household has £162 a week of discretionary income
- Most significant rise in annual rate of inflation since September 2008
- 3.5% year on year increase in cost of transport
The average UK family is £10 a week better off compared to October 2008 according to the latest data from the Asda Income Tracker.
As a result, the average household had £162 a week of discretionary income in October 2009, 6.5 per cent higher than a year earlier. This represents a significant increase year on year, but in cash terms discretionary income has been flat for the last three months.
Moreover, several factors are putting downward pressure on discretionary incomes and we expect to see a fall in the tracker over the coming months. These factors include a cumulative rise in transport costs, which have increased 3.5 per cent year on year and a rise in food and drink inflation.
The annual rate of inflation increased to 1.5 per cent in October, up from 1.1 per cent in September. This was the first rise in the annual rate of inflation in seven months and the most significant rise since September 2008.
Food and non-alcoholic beverages have risen year on year by 2.2 per cent. The price of food rose 1.7 per cent, while non-alcoholic drinks rose 5.5 per cent, with coffee, tea and cocoa experiencing an 8.3 per cent rise.
Although mortgage interest payments are 45.6 per cent lower year on year, this is largely due to comparing with a month in which Bank of England rates were still at 4.5 per cent, which is 400 basis points higher than the present rate.
Charles Davis, an economist at Cebr who compiles the report for ASDA, said “In October, the ASDA income tracker shows a smaller year on year gain in discretionary income than September. Households are better off compared to a year ago, thanks to falling mortgage payments and utility bills. However, the price of some essentials, notably transport and food, are rising relative to last year. This, combined with particularly weak earnings growth is putting downward pressure on discretionary incomes.”
Asda revealed research this weekend which showed that the price of unleaded petrol and diesel in its forecourts was on average three pence per litre cheaper than its nearest competitors and just yesterday, research from mysupermarket showed Asda offered the cheapest Christmas basket, with a saving of over £20.93 from the most expensive retailer– Ocado.
Just earlier this month the retailer announced that it would save customers £150 million in the run up to the festive season, helping millions of shoppers cut the cost of Christmas for all the family.
According to the latest Income Tracker report, gross income rose by £6 compared with a year earlier. After tax, the average family had £2 a week more net income than in October 2008, as earnings growth remained relatively week. Given the weakness in earnings growth and a rise in annual inflation likely in the months ahead, the growth discretionary income is expected to decline in the coming months.
Andy Bond, ASDA president and CEO said “Although we are seeing a rise in some household essentials, it’s up to retailers to try and keep prices as low as possible for customers during the countdown to Christmas. With transport costs on the up and food inflation rising, we’re doing everything we can to keep prices down for customers. Whether that’s offering the cheapest petrol, the best deal on your Christmas basket, or amazing offers on George and Home and Leisure, at Asda we’re determined to make the festive season even more affordable.”
Download the report