Press Centre

Disposable income sees record drop again as utility costs put pressure on budgets

UK families £15 a week worse off in September 2011 than in 2010

  • September saw a £15 a week fall in family spending power compared to the same month last year – the biggest drop since records began in 2007
  • Average UK household had £163 a week of discretionary income in September 2011, 8.4 per cent lower than a year earlier
  • Over a third of people say the cost of utilities is the biggest drain on the family purse
  • Asda customers say utilities and fuel costs remain the biggest pressure on family disposable income

The latest Asda Income Tracker has revealed that family spending power fell by £15 a week in September 2011 – the third consecutive month of record breaking decline. The squeeze left the average UK family with £163 of weekly disposable income – 8.4 per cent down from this time last year.

Annual inflation on the consumer price index grew again to 5.2 per cent in September, up 0.7 percentage points from August, placing significant pressure on household spending power.

Family budgets are squeezed further by the rising costs of basics. The rising cost of heating and lighting the home pushes the overall rate of inflation even further above the Bank of England’s target rate of 2 per cent. In September, electricity prices were some 12.9 per cent higher than a year ago, while gas prices were 22.3 per cent higher.

The cost of transport continues be the largest downward pressure on disposable income, with the cost of getting around increasing 17.7 per cent year on year in September according to the AA.

As costs go up income levels continue the downward trend, with younger workers facing particularly tough employment conditions. The unemployment rate for the 16-24 year old age group rose to 21.3 per cent over the quarter to August – up 1.6 per cent on the three months before and the highest rate since comparable records began in 1992.

Household purchasing power is continuing to decline year on year across every UK region, with worse annual drops seen in Q3 2011 than in Q2. London, the South East and the East of England are again the top three regions in terms of discretionary spending power in Q3 2011, unchanged from Q2 2011. The South East has now displaced London as the region seeing the least severe falls in real income. London has seen a one percentage-point rise in its unemployment rate over the past year to 10.0 per cent, while the South East saw a 0.5 point decrease to just 5.8 per cent.

Discretionary spend in London was £276 per week in Q3, compared to a UK average of £163, although down from £299 in the same period in 2010. Northern Ireland continued to suffer from the lowest household spending power, with the Income Tracker figure for the region dropping for the third consecutive quarter to just £76 per week in Q3, from £94 the same quarter the year before.

Asda’s own research shows that customers are adapting to family budgets being squeezed from all sides. A survey conducted on the retailer’s Facebook page last week indicated that customers were feeling the pressure, with over a third (36 per cent) citing utility bills as having the biggest impact on family budgets. The cost of getting around and filling the fridge were close behind, with 27 and 26 per cent (respectively) of people claiming transport and food bills as the biggest cost pressure. One in ten people (ten per cent) claimed preparing for the festive season put their budget under strain.

Andy Clarke, Asda President and CEO, said:
“For eighteen consecutive months we’ve seen a decline in family spending power. While disposable income was down everywhere in September, there is clearly a growing divide between the North and the South.

“Spiralling petrol costs are piling on extra pressure on households across the north of England and Northern Ireland where families are much more reliant on the car to get about.

“As we head into winter and the nights draw in we know that the cost of food, transport and utilities go up. It’s our job to continue to cut costs across all our operations so that we can hold down the price of food and fuel and help hard-pressed families make ends meets as prices are rising everywhere else*.”

*as confirmed by the Grocer 33 survey that said Asda is the only supermarket to keep its prices at the same levels as in 2010.

Charles Davis Managing Economist, Cebr comments:
“Family spending power continues to be under significant pressure from the three-pronged threat of fragile wage growth, rising unemployment levels, and soaring consumer price inflation.

“The latest Asda Income Tracker illustrates how household disposable income has dropped considerably from a year ago. As utility price increases continue to feed through into erosions in family budgets, a tough couple of months lie ahead. However some pressure could ease from the start of 2012, as inflation is expected to fall back.”

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Posted in Press Centre on 25 October 2011