Press Centre

Disposable Income Declines Slowdown Further in January

But UK families still £9 a week worse off in January 2012 than a year earlier

  • UK families were £9 a week worse off in January 2012 compared to the same month a year earlier

  • Average UK household had £147 a week of discretionary income in January, 5.5 per cent lower than a year earlier

  • Lowest annual decline since June 2011

  • Asda launches new online budget planning tool to help families balance the books

The latest Asda Income Tracker has revealed that family spending power fell by £9 a week in January 2012 – marking a further improvement on the pace of decline in recent months, with the lowest annual decline since June 2011. This left the average UK family with £147 of weekly disposable income – 5.5 per cent down from the same time last year.

While income growth remained weak at just 1.7 per cent over the year to January, a continued slowdown in the rising cost of essential items eased pressure on family budgets. The trend of smaller year-on-year declines continued, as consumer price inflation drops back from its peak last year. The official measure of the rising cost of living slowed notably in January, as the consumer price index (CPI) rose over the year by 3.6 per cent. This is the second consecutive sharp slowdown, and the largest two-month fall in the rate in three years.

A significant contributor to the sharp decline is the fact that rise in the VAT rate to 20.0 per cent last January is no longer shown in the annual price comparison. However this price increase is still built into the cost of living and will have a long-lasting effect on family purchasing power. The news in January that utility firms cut back the cost of power also offered a welcome break.

Balancing the two conflicting elements, family income growth is still very fragile, with the improving cost of basics overshadowed by the high number of workers becoming unemployed. Unemployment increased to 8.4 per cent during the three months to December– up from 7.8 at the start of 2011 – a trend that will continue to pull household finances away from growth.

Andy Clarke, Asda President and CEO, said:
“It’s encouraging to see the cost of basics improving, easing the pressure on family spending power and freeing up cash to spend elsewhere.”

“Families are making smart choices, doing more with less and staying optimistic about maintaining their quality of life.”

Charles Davis Managing Economist, Cebr comments:
“Falling inflation and the slowdown in the rising cost of living is good news for consumers, and will ease the strain on family budgets."

“The last two years have seen significant erosions to real incomes as inflation soared, particularly in 2011. This is likely to be less of a problem through 2012 as the inflation rate heads back towards the Bank of England’s 2.0 per cent target."

“While this is good news and the Asda Income Tracker is expected to continue to take steps towards stability, the on-going weakness in the labour market is a nagging concern.”

Download the full report

It’s important to note that the Income Tracker model has been updated this month. Full detail can be found here:

Earlier this week Asda (Tuesday 21st February) announced the launch of its first Mumdex report – a substantial piece of research that doesn’t look to house prices or retail sales data to predict consumer confidence, but takes a look at how thousands of UK families are coping with the realities of the changing economic landscape. The report revealed that while 75 per cent of UK families are worse off than a year ago, mums are optimistic about the future of their own family’s quality of life. This optimism is driven by mums feeling confident in their ability to manage their own household finances – reflecting a ‘make do and mend’ mentality. The full report can be downloaded here:

The Mumdex findings give Asda the genuine insight required to inform and shape future business actions that truly resonate with mums. One such action was the launch of the Asda Budget Planner.

The Asda Budget Planner is hosted online, taking the clever cebr modelling from the Income Tracker and turning it into a personal budget planner that will help people understand what’s coming in, going out and how much is left over each week. It will also give them a comparison to families in their region, families the same size as theirs and those with the same level of income.

Posted in Press Centre on 24 February 2012