Rising inflation and weak wage growth continue to erode family spending power
£1 a week fall in discretionary household income for UK families last month says Asda Income Tracker.
- The average UK family had £157 a week of discretionary income in May 2013, down £1 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 0.9% in the year to April – the second smallest year-on-year rise on record
- The sharp rise in the rate of essential item inflation, up 0.3 percentage points to 2.9%, also played a role in the decline in discretionary household income
- Good news for motorists, however, with the cost of fuel falling 2.9% year-on-year
The latest Asda Income Tracker has revealed that family spending power fell by £1 a week year-on-year in May 2013 – driven by rising inflation and persistently weak wage growth.
According to the latest figures, released today (Monday 24th June), the average UK family had £157 of weekly discretionary income available to them in May 2013, down from £158 in the same month last year. This means discretionary income is well below its peak of £165 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 0.9% in the three months to April. This was less than a third of the rate of essential item inflation (2.9%) and the second lowest rise on record since the Office for National Statistics began collecting comparable figures in 2001.
In fact, had it not been for the recent (April) rise in the income tax-free allowance – from £8,105 to £9,440 – household discretionary income would have fallen even further, by an additional £4 a week.
The sharp rise in inflation of essential items, up 0.3 percentage points, also added to the squeeze on household finances. The cost of gas and electricity prices, for instance, were up 8.3% and 7.7%, respectively compared with a year ago, while mortgage interest payments and food inflation were also both up 4.3% on the year.
There was good news for motorists, though, with the cost of fuel falling 2.9% year-on-year, reflecting the recent drop in the price of Brent crude oil.
Asda president and CEO Andy Clarke said:
“Last month the increase in personal tax allowance relieved the pressure on family budgets, as green shoots in the economy started to emerge. However, the reality of three years of near continuous decline in disposable income means families don’t feel any better off.
“The fluctuation of disposable income levels throughout 2013 further demonstrates the fragility of spare cash available to families, which is crucial to stimulating economic growth.”
Rob Habron, Economist at CEBR added:
“Household incomes are struggling to keep pace with the rising price of essentials, leaving discretionary spending power £8 per week lower than it’s peak seen in 2010.
“Although reduced motor fuel prices, higher tax free personal allowances and a solid job creation in the private sector have helped support household finances, the weakness of earnings growth and above target inflation remain ongoing pressures.”
See the full report here.