Press Centre

Disposable income falls as the cost of living continues to outpace household income

Disposable household income down £1 a week year-on-year says Asda Income Tracker

  • The average UK household had £160 a week of disposable income in July 2013, down £1 a week from the same month last year and £5 a week from its peak in February 2010
  • Factors including weak wage growth and the ongoing effects of the cap on working age benefits have slowed net income growth – down 0.4 percentage points this month, to 2.2%
  • Energy bills continue to burn a hole in household budgets – rising over the past year by 8.2%, the fastest annual increase in home energy since August 2012
  • Good news though for homeowners as the annual growth in mortgage interest payments fell to 2.7% – the lowest since July last year

The latest Asda Income Tracker reveals that family spending power fell by £1 a week year-on-year in July 2013, as the cost of living continues to outstrip household income.

According to the latest figures, released today (Monday 19th August), the average UK family had £160 of discretionary income available to them in July 2013, unchanged from last month and well below its peak of £165, last seen in February 2010.

Slow wage growth and the 1% cap on working age benefits were again key factors behind this year-on-year decline, with average pay excluding bonuses up just 1.1% in the three months to June. The cost of essential items went up almost three times more (2.9%) over the same period than average pay, which was only marginally better than the 0.8% growth – an all time low – seen in the three months to March.

In fact, had it not been for the rise in the income tax-free allowance in April – from £8,105 to £9,440 – household disposable income would have fallen even further, by an additional £5 a week.

Despite a marginal fall in the inflation rate of essential items to 2.9%, the cost of living continued to rise faster than net incomes (2.2%), adding to the squeeze on family budgets. Over the past year, utility costs have risen by 8.2% – the fastest annual increase in home energy costs since August 2012.

Asda president and CEO Andy Clarke said:

“Consumer optimism is on the increase as families begin to feel less gloomy about the economy and their finances – despite the slight drop in disposable income.

“A ‘feel-good’ summer has contributed to a boost in retail sales, but we can’t ignore the fact that the squeeze on income growth and rising cost of living continue to pull at consumer purse strings.

“While household finances have a long way to climb to reach pre-recession levels the resilience shown by customers has set us on the first rung of the ladder.”

With energy bills continuing to hit family finances hard, there was better news for homeowners this month, with annual growth in mortgage interest payments falling to 2.7%, its lowest since July last year.

Rob Harbron, Senior Economist, Cebr, said:

“Growth appears to be picking up in the UK economy, but concerns remain on how sustainable this will be.

“Highlighting these concerns, the Asda Income Tracker shows the extent to which household finances are still under pressure. With earnings growth remaining very weak, rapid increases in the cost of living continue to erode family spending power.”

You can read the full report here.

Posted in Press Centre on 16 August 2013