Family spending power at a 12 month low as wage growth sees steepest decline since the start of the 2008 recession
£1 a week fall in discretionary household income for UK families last month says Asda Income Tracker – the second consecutive year-on-year decline
- The average UK family had £155 a week of discretionary income in April 2013, down £1 a week from the same month last year and £10 a week from its peak in February 2010
- Rising unemployment and the lowest wage growth on record were both key factors in the fall in spending power in April
- Steepest decline in wage growth since the start of the 2008 recession
- Soaring energy prices continue to squeeze household budgets, with the price of gas up 8.3% year-on-year
- Good news for motorists, with the cost of fuel falling 3.7% year on year, reflecting the recent drop in the cost of Brent crude oil
The latest Asda Income Tracker has revealed that family spending power fell by £1 a week year-on-year in April 2013 – driven by the sharpest decline in wage growth since the start of the economic crisis.
According to the latest figures, released today (Monday 27th April), the average UK family had £155 of weekly discretionary income available to them in April 2013, 0.5% down from the same time last year. This is the second consecutive year-on-year decline and means discretionary income is well below its peak of £165 in February 2010.
A weak increase in the average UK wage was the primary driver behind this fall, with wage growth falling at the fastest rate since the start of the economic crisis. Average pay rose to just 0.8% over the year to April, less than a third of the rate of essential inflation (2.6%) and the lowest rise on record since the Office of National Statistics began collecting comparable figures in 2001.
Unemployment in the UK also increased by 15,000 over the last year to 2.52 million, pushing the jobless rate to 7.8%. According to the most recent figures unemployment among young people aged between 16 and 24 is now at 958,000 – a rate of 20.7%.
The cost of utilities such as electricity and gas was also a key factor, with gas prices up 8.3% year-on-year, the highest rate since August last year.
Asda president and CEO Andy Clarke said:
“Whilst our Income Tracker records a drop in national wage growth, the increase in the personal tax allowance should relieve some pressure although it will take time before we see the knock on effects in consumer spending. This is consistent with the view that the economy is showing signs of recovery.”
In April the income tax free allowance increased from £8,105 to £9,440. This helped to boost net household income by 2.1% to £582 and eased pressure on discretionary income, without which it would have declined by an additional £5.
There was also good news for motorists, with the cost of fuel falling 3.7% year-on-year, reflecting the recent drop in the price of Brent crude oil. The cost of transport overall also declined 0.1%, the first time transport costs have fallen year-on-year since July 2009.
Rob Habron, Economist at CEBR said:
“A higher tax free personal allowance and lower inflation on some essentials, such as petrol, have helped this month to ease the stress on household finances.
“However, ongoing very slow wage growth and high unemployment are preventing any real gains to discretionary spending power. The squeeze on household incomes has returned in 2013 despite the gradually improving economy.”
See the full report here