Press Centre

Rising unemployment and falling earnings growth puts downward pressure on family finances

The average UK household had £143 a week disposable income in January 2009, two per cent lower than a year earlier, according to the latest Income Tracker report from ASDA.

As a result the average family is now £3 a week worse off. The report indicates that inflationary pressures are easing rapidly, which means family discretionary spend is likely to rise within the next couple of months.

However as the fear of unemployment increases, many households will opt to save rather than spend any extra household income.

The new risk to discretionary spend comes from rising unemployment and weaker earnings growth.

Andy Bond, ASDA President and CEO said: “The latest report indicates that the average family will have a little more money at their disposal in the coming months. However, the fear of unemployment and the downward pressure on earnings is increasingly becoming the key factor affecting household budgets.

“With worries about future job security, the danger is that people become increasingly reluctant to spend money in the current climate, which could hamper the Government’s efforts to speed up economic recovery.

“Increasingly our customers tell us they are finding additional ways to supplement their income. Our latest Pulse of the Nation survey has found that one third of people are now working longer hours, looking for overtime, or taking second jobs. While a large number have started selling unwanted belongings through eBay and car boot sales.”

The latest public finances data showed a 7.7 per cent fall in the tax paid by households in January 2009 compared with January 2008. The cost of transport has fallen by 1.9 per cent over the year to January 2009, while food prices also fell in the month, helping to bring inflation on essential goods for the average UK family down to 3.4 per cent.

Across the regions, the South West and Northern Ireland have taken the biggest proportional hit to discretionary income compared with a year earlier (Jan 08 vs Jan 09). Lower middle income earners are still amongst the most affected by the after effects of high inflation through 2008.

Charles Davis, economist at the Cebr said:

“The ASDA income tracker shows further signs of the cost of living burden being reduced as inflationary pressures subside. However, downward pressure on discretionary incomes is coming from rising unemployment and weaker earnings growth.

This is one of the key reasons why families are still worse off than a year ago on this measure.”

Posted in Press Centre on 23 February 2009