Press Centre

Disposable income lowest since 2008 despite slowing declines

UK families £6 a week worse off in April 2012 than a year earlier

  • UK families were £6 a week worse off in April 2012 compared to the same month a year earlier, 4.2 per cent lower than a year earlier
  • Average UK household had £144 a week of discretionary income in April, the joint-lowest level of disposable income since November 2008
  • Declines in family spending power slowed in April, driven by the lowest inflation rate increase since September 2010

The latest Asda Income Tracker has revealed that family spending power fell by £6 a week in April 2012 – leaving the average UK family with £144 of weekly disposable income, 4.2 per cent down from the same time last year.

While this is the joint-lowest that weekly discretionary incomes have been since November 2008, the latest movement in the Income Tracker is an improvement on previous year-on-year declines. Indeed, a £6 annual decrease is the smallest since March 2011.

Growth in the cost of living slowed notably in April – to the lowest rate in 19 months. The consumer price index (CPI) rose over the previous twelve months by 3.0 per cent, down from 3.5 per cent annual inflation in March. Annual growth in the price of essential items also slowed in April to the lowest since July 2010.

As well as those that are in work seeing small year on year salary increases, well below inflation, tough conditions in the labour market mean unemployment is still having an impact despite slight year-on-year improvements in the headline rate. 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 remaining unemployed. Family finances are likely to remain constrained for some time yet.

Despite some recent improvements in the cost of utilities and food with a drop in wholesale prices and energy providers making cuts to bills in March, they are still two of the main factors putting pressure on discretionary spend. Electricity and gas charges were 8.1 and 15.4 per cent higher in April than twelve months before, while food costs rose by 4.3 per cent over the year.

The cost of getting around continues to be a significant pressure in April, with petrol and diesel prices continue to set new records and were 4.9 and 4.2 per cent higher in April than a year before as cost prices remained high and the benefit of supermarket price cutting is yet to kick in. However the cost of a barrel of crude oil has fallen over the past month, which could feed through into lower prices at the pump later this year.

Asda Mumdex research, released earlier this week, reveals that tough times remain with Asda Mums feeling more gloomy about the future than they were last quarter. The overall Mumdex optimism score falls from net -8 per cent to net -16 per cent.

The substantive research, made up of a panel of 4,000 mums, shows that fears over the balancing the books are affecting not just mums’ concerns for the family budget in the here and now, but real threats to their kids’ futures and their family’s quality of life.

Mums’ gloom is driven by a significant increase in their pessimism about the future of their family’s quality of life, down from net 23 per cent optimism in February, to net 6 per cent this quarter and a fall in optimism about their household finances, down from net 6 per cent in February to net -6 per cent. While finances remain a very real concern – the Asda Income Tracker shows families are substantially worse off now than a year ago. The cost of raising children remains mums’ top challenge of parenting – while they feel powerless to improve job opportunities and education, 68 per cent of Asda Mums are protecting the money they have to spend on their children. Asda has seen this replicated in its stores, with sales of kids treats like magazines and small toys up 11pc year on year.

Andy Clarke, Asda President and CEO, said:

“Although the cost of essentials has fallen and declines in disposable income have slowed, the underlying story is not as positive as it first appears.

“In real terms UK families have less cash in their pockets now than they did a year ago – and when you take a two-year view it’s clear we’re facing the longest consecutive decline in disposable income since the 1920s. We see customers adapting their behaviour to a ‘new normal’, making every penny count.

“In this environment holding down prices has never been more important. We’re firm in our commitment to help tackle this as family finances remain tougher than ever before.”

*Charles Davis Managing Economist, Cebr comments:"

“The slowing growth in the price of essentials seen in April is good news for UK households and eases the pressure on family budgets, as shown by the Income Tracker.

“On the downside, labour market conditions are expected to continue acting as a constraint on income growth. Persistently weak wage increases look set to continue and as a result, further real income erosions are likely this year.”

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Posted in Press Centre on 24 May 2012