Press Centre

Disposable Income Back In Black For First Time In Over Two Years

  • UK families were £1 a week better off in July 2012 compared to the same month a year earlier, the largest annual increase since March 2010
  • The average UK household had £151 a week of discretionary income in July 2012, 0.6pc up on the year before
  • Improvements driven by low inflation and better-than-expected unemployment figures but uncertainty in the wider economy and labour market continues to cause concern

The latest Asda Income Tracker has revealed that family spending power improved very slightly in July 2012, with a second consecutive, albeit marginal, annual increase in the Income Tracker. More than one increase in a row has not happened since March 2010. According to the latest figures the average UK family had £151 of weekly disposable income available to them in July 2012.

The slight improvement in disposable income recorded for July 2012 is driven by easing inflation on family budgets – with food, clothing and transport inflation all falling over the month. The unemployment rate also fell to 8.0 per cent during the three months to June 2012 – a decrease of 0.2 percentage points on the quarter and the lowest rate since June 2011.

This month’s annual increase in discretionary incomes follows a general improving trend from September last year. Income erosions have been shrinking since then as price inflation for essential items has fallen back. But despite the lessening impact of inflation on household budgets, when the month is put in context over two years UK families are still £8 a week down on disposable income available in 2010 – budgets are stripped bare.

Slow pay growth and a fragile economic outlook continues to hold back income and create concerns for families as the UK economy languishes in recession. Increased price pressures from the cost of food and fuel could emerge in future months, as crude oil and food commodity prices rose in July.

Housing and utility costs remain the largest contributor to growth in the cost of living, contributing one third of the overall 2.6 per cent inflation rate. Gas prices rose by 15.4 per cent year on year in June while the cost of electricity increased by 8.0 per cent and rental prices by 3.5 per cent.

However, the cost of petrol and diesel declined for the third consecutive month in July, as the effect of falling crude oil prices earlier in the year continued to feed through. Prices at the pump were 2.0 per cent lower than their level in July last year.

Asda president and CEO Andy Clarke said:
“At last this is a bit of light at the end of the tunnel for UK families – with the first improvement in disposable income for over two years.

“However customers still have less in their pockets this month than they did two years ago – there’s no doubt that balancing the books is still a challenge.

“Despite an improved picture families have very real worries about unemployment and the fragility of the wider economic situation. It’s still tough out there.”

Charles Davis, Head of Macroeconomics at Cebr comments:
“This second month of increases on the Income Tracker is welcome news for UK families, as the average household now has the highest amount of discretionary income in 16 months.

“However it may not be all plain sailing ahead as pressures remain. There is still much underlying weakness in the labour market and unemployment is likely to stay persistently high.

“In addition, recent increases in the cost of crude oil could well feed through into the cost of living in the coming months.”

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Posted in Press Centre on 21 August 2012