Spending power outlook is tough as real disposable income growth remains weak up to Christmas
Leading economists Cebr have forecast that UK families could face the lowest amount of disposable income for more than two years in the final quarter of 2010.
The second half of the year is expected to be an upward struggle for the average household as income growth struggles to match inflation. In a one-off, forward looking Income Tracker report, Cebr predict a modest uptick in December, but disposable income in the final month of the year is predicted to be £172 – £5 lower than December 2009 and the same level as December 2008 when the UK economy entered recession.
The report notes that a faster decline in inflation or stronger recovery in the labour market would lead to more modest year-on-year declines in spending power. Conversely, if higher inflation than we are assuming persists, interest rates rise, the labour market relapses or earnings growth weakens then steeper falls in spending power would be expected.
In addition to rising inflation, the report notes that unemployment is expected to drift up through 2010 as private sector job creation remains indecisive amid caution over the strength of a recovery.
Charles Davis, managing economist at Cebr said; “We see things as pretty tough for the consumer. We are looking at really weak real income growth, and we expect that to continue in 2011.”
Andy Clarke, Asda president and CEO said: "These are increasingly uncertain times for millions of families across the UK, and it’s clear from all the data customers will need us more than ever.
“We’re shopkeepers not economists, but in this ‘age of austerity’ we know the pennywise will thrive. Our stimulus package for the economy starts with saving our customers money every time they shop –real money that can be saved, or spent elsewhere."