Family spending power at a six-month low as UK sees weakest wage growth on record
Discretionary income down £2 a week year-on-year says Asda Income Tracker.
- The average UK household had £157 a week of discretionary income in September 2013, down £2 a week from the same month last year and £8 a week from its peak in February 2010
- Weak wage growth was again a key factor, up just 0.8% over the past year – the smallest year-on-year rise on record
- The rising cost of energy continues to put pressure on household budgets, with the price of electricity and gas up 8.1% and 8.3% respectively
- Good news for home owners as the cost of inflation on mortgage interest payments fell for the sixth consecutive month to 2.3% year-on-year – the lowest rate since July 2012
- Across the UK, spending power fell back in every region except for the East of England (0.6%), with the West Midlands (-3.5%) and Northern Ireland (-3.5%) hardest hit
The latest Asda Income Tracker has revealed that family spending power fell by £2 a week year-on-year in September 2013 – driven by the weakest wage growth on record in the UK.
According to the latest figures, released today (Monday 21st October), the average UK family had £157 of discretionary income available to them in September 2013, down £2 on last month and well below its peak of £165, last seen in February 2010.
A weak increase in the average UK wage was again a key factor behind the rising cost in living, with average pay up just 0.8% in the three months to September. This was less than a third of the rate of essential item inflation (2.8%) and the lowest rise on record.
There was welcome news, as the rate of essential item inflation fell marginally to 2.8%, but the cost of living continues to outpace net income growth (2.1%), squeezing household budgets further. The cost of gas and electricity, for instance, rose by 8.1% and 8.3% respectively in September– the highest rate for three months. The cost of utilities is now 24.7% higher than it was in 2008, equivalent to £700 a year, and will top £4,200 by 2018.
Across the UK, spending power fell back in every region except for the East of England (up 1.2%) and Scotland (up 0.6%), largely thanks to strengthening local labour markets in these areas. Households in Northern Ireland continue to be hit hardest, with discretionary income down 3.5% to just £60 a week – almost a quarter of the amount available to households in London (£235 a week).
Asda president and CEO Andy Clarke said:
“It’s encouraging to see that inflation in essential items is heading in the right direction. However, it is becoming even more evident that action needs to be taken to address widespread regional discrepancies.
“Aside from overall household spending power being at a six month low and the rising cost of energy bills adding extra pressure , when you look beyond the capital and South East the situation across the regions gets steadily worse – with families in Northern Ireland and the North East still squeezed to a far greater degree.
“We can only celebrate the full benefits of an economic recovery if it is a fair recovery for all and the continued shortfall for millions of households is a worrying and unacceptable reality.”
The monthly Asda Income Tracker also revealed that:
- The West Midlands saw the slowest growth in household gross incomes, up just 0.9% over the year, as the unemployment rate in the region climbed by 0.8% in the three months to August
- Discretionary Income in Scotland was broadly stable in the three months to August, up 0.6% to £161 – £3 above the national average
- There was better news for homeowners across the UK this month, with annual growth in mortgage interest payments falling to 2.3%, the sixth consecutive decline since its high of 4.6% in March 2013
- Unemployment in the UK fell by 18,000 over the last quarter to 2.49 million, pushing the jobless rate down marginally to 7.7% – the lowest rate since October 2012.
- The proportion of people working part time because they couldn’t find full-time work hit 18.5% – the highest rate since records began in 1992
Rob Harbron, Senior Economist, Cebr, said:
“The UK economic recovery continues to gain momentum in 2013, as growth picks up pace and business confidence has reached its highest level in year.
“However, as the Asda Income Tracker highlights, the effects of this recovery are not translating into growth in purchasing power for the average UK household. Inflation on essential items continues to stand well below income growth, which is being held back by spare capacity in the labour market.”
The full report is available here.