ASDA income tracker reveals families are Â£13 a week worse off
The average UK household had £131 a week of discretionary income in February 2009, 9.2 per cent less than a year earlier and the lowest monthly value since the ASDA monthly income tracker began.
It means families were £13 a week worse off in February 2009 due to a sharp drop in earnings growth caused by a collapse in bonus payments across the economy, and an increase in taxes.
Discretionary spending was also squeezed by a rise in prices, following a reverse of discounts offered during the January sales, and the ongoing effects of sterling depreciation raising the cost of imported goods.
Average total household incomes were £14 a week higher in February 2009 compared with February 2008. However, average families paid £3 a week more tax than a year earlier so net household income was £11 a week higher.
This was the smallest annual rise in net income since the income tracker began, driven by the lowest rate of growth in average earnings since official records began in 1990.
The cost of living rose in February as firms reversed January discounts and in some cases, the VAT cut discounts they had applied in December 2008. This caused the annual rate of inflation to climb for the first time since September. As a result the average family’s essential goods cost £24 a week more than in February 2008.
Andy Bond, ASDA President and CEO said:
“The continued weakening of the labour market and spike in inflation have pushed the income tracker to a new low. It means families are now £13 a week worse off than a year ago. The cost of living is being pushed back up, in part, by the largest depreciation in sterling’s value since the early 1970s – making imported goods more expensive, and by some retailers pushing prices back up again after their January sales.
“Although later this year we expect lower commodity prices to filter through, the challenge for retailers is to keep prices permanently low for consumers, and not get hooked on short-term discounts.
“In the longer term I believe the best way to lock down inflation is for businesses like ours to remove all unnecessary costs from their operations, and for Government to actively promote competition, not seek to restrain it.”
Charles Davis, senior economist at Cebr said:
“The ASDA income tracker showed a steep drop in January and February 2009 as earnings fell sharply. A larger than expected rise in inflation in February made the hit on household incomes even worse. We do still expect inflation to drop noticeably through 2009 but earnings growth is likely to approach zero – hitting the average UK family’s discretionary income.”