March's fall in family spending power cushioned by fall in inflation
Asda Income Tracker shows family spending power is £10 per week less than last year
- £10 a week fall in family spending power compared to the same month last year – represents the first month of improvement in the past 14 months
- London has lowest fall in spending power; Northern Ireland the highest
- Essential goods inflation reduced as fruit, bread and cereal prices fall
- Average UK household had £172 a week of discretionary income in March 2011, 5.6 per cent lower than a year earlier
The latest Asda Income Tracker has revealed that in March 2011, family spending power fell by £10 per week, the first time in 14 months that it hasn’t fallen lower than the previous month. The average family had £172 per week to spend in March, 5.6 per cent down from this time last year.
Gross incomes grew at an annual rate of 2.2 per cent in March, broadly unchanged from last month. The incline in family spending power in March compared to February was the result of a fall in inflation in March to 4 per cent, slightly down from the 4.4 per cent recorded growth in February. A contributory factor was falling food prices; fruit, and bread and cereal prices fell by 4.7 per cent and 2.6 per cent respectively. This resulted in a slight reduction in essential goods price inflation which was 4.4 per cent in March 2011 – slightly down from 4.7 per cent in February 2011.
Transport costs in March continued to rise with the price of petrol remaining likely to be the greatest risk to household spending power this year. With Londoners spending proportionately less on transport they have been less affected by petrol prices. This has been a driving factor in the fall in spending power, which is currently lower in the capital than in any other region. The average gross weekly household income in London for the first 3 months of the year was £936, much higher than the £724 seen for the UK as a whole.
By contrast, spending power has fallen sharply in Northern Ireland with an annual decline of 11.9 per cent. Continued weakness in the labour market is a key factor as Northern Ireland will likely be heavily affected by public sector job losses and pay freezes.
Andy Clarke, Asda president and CEO, said:
“The message to retailers is clear, keeping prices as low as possible can make a real difference to the money left over at the end of the month.
“The Grocer magazine this month acknowledged that we were the only retailer to neutralise the impact of inflation over the quarter.”
“And with the regulatory green light to convert the Netto stores into Asda Supermarkets, we’re pleased some of the most challenged towns will soon benefit from our low prices and extended ranges.”
Charles Davis Managing Economist, Cebr comments:
“Falling food prices took away some of the pressure on household finances in March – though the rising cost of petrol and transport continues to place downward pressure on discretionary income.
“The latest labour market data shows a fall in unemployment. However, annual earnings growth remains subdued, standing at about half the rate of consumer price inflation. Unless household pay packets grow more strongly over the coming months, the Asda Income Tracker is likely to remain weak throughout much of 2011”