Press Centre

January's fall in family spending power beats records for second month in a row

Asda Income Tracker shows cost of living continues to rise above earnings growth

  • £9 a week fall in family spending power compared to the same month a year ago is the largest decline since the Income Tracker began
  • It represents the 13th month of consecutive decline
  • Average UK household had £174 a week of discretionary income in January 2011, 4.7 per cent lower than a year earlier

The latest Asda Income Tracker has revealed that in January 2011, family spending power fell by £9 per week, the largest fall on record and the second record breaking month in a row. The average family had £174 per week to spend in January, 4.7 per cent down from £183 this time last year. When the impact of bonus payments is included, family spending power also decreased by £9 over the year to January, a fall of 4.3 per cent.

The continued decline in family spending power in 2010 and into 2011 was the result of the price of essential goods and services rising faster than net income growth. Gross incomes grew by 2.4 per cent in January 2011 year-on-year, down from 2.6 per cent in December but above the lows experienced in 2009.

The rise in inflation points towards the depreciation of sterling, rising global commodity prices and the VAT rise in January 2011. With ongoing disruption to oil supplies through Egypt and vibrant demand from emerging economies, the price of crude oil put pressures on petrol costs in January. In addition, VAT rose to 20 per cent on January 4th, and earnings growth has remained sluggish. As a result, those factors which caused the Asda Income Tracker to fall in 2010 have persisted into 2011 and are likely to continue over the short term.

Transport was yet again the largest contributor to the headline rate of inflation in January, which remained the single most important element of consumer price inflation. According to the AA, the cost of unleaded petrol rose 17.8 per cent between January 2010 and January 2011.

Charles Davis Managing Economist, Cebr comments:
“With annual consumer price index inflation double the Bank of England’s target rate, while earnings growth remains modest, average households are seeing spending power sharply eroded.”

“This trend is likely to continue into 2011, as inflation remains elevated and the labour market recovery lacks conviction.”

Andy Clarke, Asda president and CEO, said:
“The latest drop in household spending power reflects what we’re seeing in our stores – customers making each pound count.”

“We’re conscious that we’re now seeing year-on-year declines in disposable income that reinforce our responsibilities to shoppers – holding back inflation, keeping prices low, and being at our best in helping them deal with whatever the economy throws at them.”

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Posted in Press Centre on 25 February 2011