Press Centre

Family spending power down 7.1 per cent as prices increase twice as fast as income

UK families face biggest ever challenge as Asda’s Income Tracker shows inflation has reduced disposable spending by £13 a week.

  • £13 a week fall in family spending power compared to the same month last year – a further decline from the relative stability of March 2011

  • Sharp rise in inflation puts disposable income under significant pressure

  • Average UK household had £167 a week of discretionary income in April 2011, 7.1 per cent lower than a year earlier

The latest Asda Income Tracker has revealed that family spending power fell by £13 per week in April 2011, a significant fall from the relative stability of March 2011 when spending power stabilised at a £10 per week. The average family had £167 per week to spend in April – 7.1 per cent down from this time last year.

Consumer price inflation rose sharply from 4.0 to 4.5 per cent in April and the Bank of England has warned that inflation could increase further still over the coming months –predominantly due to soaring utilities bills. At the same time, whilst the latest labour market data is showing a fall in unemployment, it also shows earnings growth running far below inflation and typical pre-recession levels.

The data indicates that while the UK economy continues to gradually recover, consumers remain under significant financial pressure as growth in income fails to keep pace with the rising cost of living.

Rising costs of basics also continue to put pressure on family budgets. Transport costs continued to be the largest contributor to the headline rate of inflation in April. The cost of getting around is now 9.6 per cent higher than a year ago –a result of soaring petrol prices and higher train fares. In fact, recent AA data showed that unleaded petrol prices are some 12.7 per cent higher in April 2011 than in the same month a year ago.

Housing and household services contributed 0.6 percentage points to the annual rate of inflation, largely due to rising domestic heating costs and rents. Alcoholic beverage and tobacco prices have risen by 8.9 per cent over the year to April 2011, largely due to increases in excise duty for these goods which came into effect last month.

Andy Clarke, Asda President and CEO, said:

“Spending power has seen another significant fall this month which is adding further pressure on family budgets.

“We know that shoppers are being savvy and managing their finances by scratch-cooking and buying what they need, when they need it.”

Charles Davis Managing Economist, Cebr comments:

“While the Asda Income Tracker showed signs of stabilising in March, as falling food prices pushed down inflation, subsequent rises in transport and utilities prices have pushed the cost of living back upwards

“This is being compounded by lacklustre annual earnings growth, which is currently running at less than half the rate of inflation. Households are under significant financial duress at the moment and it looks like high inflation will keep up the squeeze throughout the year.”

You can download the full Income Tracker report for May 2011 here

Posted in Press Centre on 22 May 2011