Press Centre

Disposable income falls back to decline in February

UK families £10 a week worse off in February 2012 than a year earlier

  • UK families were £10 a week worse off in February 2012 compared to the same month a year earlier, a step back from improvements seen in previous months
  • Average UK household had £144 a week of discretionary income in February, 6.3 per cent lower than a year earlier
  • Rising cost of basics continues to outrun earnings growth

The latest Asda Income Tracker has revealed that family spending power fell by £10 a week in February 2012 – reversing the improving trend seen in recent months. This left the average UK family with £144 of weekly disposable income – 6.3 per cent down from the same time last year.

Income growth remained weak at just 1.7 per cent over the year to February and when this is added to high inflation on the cost of basics, family spending power is being squeezed in both directions. 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.

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, and those that are in work seeing small year on year salary increases, well below inflation.

Earnings growth fell back to the slowest pace in 18 months – just 1.7 per cent. The last time it was lower than this was July 2010. Unemployment stood still in the three months to January, unchanged from the previous reading. This is a substantial worsening from a rate of 7.9 per cent in the same period the year before – a trend that will continue to pull household finances away from growth.

Despite some improvements in the cost of utilities and transport, they are two of the main factors putting pressure on discretionary spend. The cost of electricity and gas remains well above that of last year, and petrol and diesel prices by 4.2 and 4.7 per cent respectively over the last year.

Asda Mums this week (Tuesday 20th March) called on the Government to stop taxing the school run by reducing the cost of fuel duty. The call followed news that UK drivers are now paying the highest fuel taxes in Europe. Over half of those mums polled (54%) admitted they have had to cut back on driving due to the spiralling cost of filling up. Asda Mums surveyed said they wanted the Chancellor George Osborne to cut, not just freeze, fuel duty in order to lower the cost of driving. The combined cost of duty and VAT already equates to more than 80p of the retail price of a litre of both unleaded and diesel.

The nationwide survey revealed that Asda Mums only have an average of £25 to spend on fuel each week and with costs increasing they’re cutting back on essential spending in other areas just to make ends meet. The average cost to fill up a tank is now more than £70.

Andy Clarke, Asda President and CEO, said:

“It’s disappointing to see a reverse in improvements to the cost of basics seen in previous months, putting a further pressure on already squeezed family budgets.

“I take my lead from what our shoppers tell us, and I think the Chancellor has faced the same challenge that families face every day – balance the books, but find smarter ways to limit the impact.

“Asda mums told us loud and clear that the single most important thing for them was a cut in the price of fuel, so they’ll be disappointed the planned duty rise in August still stands but pleased at changes to personal tax allowances that will give them more to spend on their families.”

Charles Davis Managing Economist, Cebr comments:

“The latest slowdown in inflation is good news for the cost of living and household budgets, although the headline rate is still above the Bank of England’s 2.0 target rate and the price of oil remains persistently high.

“While inflation is likely to fall further over the coming months, resulting in smaller declines on the Asda Income Tracker, weakness is expected to remain in the UK labour market for some time and earnings growth to be only slow over the coming year. As a result, real income erosions are likely to continue for a third year in 2012.”

Last week (Thursday 15th March) Asda launched a new petrol price comparison site, powered by independent price checker, to enable drivers across the UK to find the lowest priced fuel before they fill.

The supermarket aims to save Britain’s 38m drivers millions of pounds at the pumps each year by publishing the highest, lowest and average prices in every one of the 195 towns in which it operates a filling station. It will also publish the price it charges for both unleaded and diesel to allow drivers to check and compare prices within a three mile radius of their local Asda forecourt.

Asda intends to expose the huge discrepancies charged by its rivals in towns where Asda doesn’t currently operate. For example, in Worcester, where Asda doesn’t have a store or filling station, diesel costs as much as (148.9) pence per litre – 5p more than Asda charges at any of its filling stations across the UK.

Research by the AA has previously shown that the presence of an Asda filling station in a town has a direct correlation to the average price per litre charged at the pumps by its rivals. Last year it also calculated Asda was on average 1.5p per litre cheaper than its nearest rival on price.

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.

> Download the full report

Posted in Press Centre on 23 March 2012