Press Centre

Unemployment erodes family spending power in November

UK families £15 a week worse off in November 2011 than a year earlier

  • November saw a £15 a week fall in family spending power compared to the same month last year – stabilising the declines seen in previous months
  • Average UK household had £161 a week of discretionary income in November, 8.4 per cent lower than a year earlier
  • The cost of basics and worsening employment conditions erode family spending power

The latest Asda Income Tracker has revealed that family spending power fell by £15 a week in November 2011, leaving the average UK family with £161 of weekly discretionary income –8.4 per cent down from this time last year. This represents a stabilising in the year-on-year decline in family spending power, with a similar picture predicted for 2012.

Annual growth in the cost of basics decreased to 5 per cent in November – the second consecutive slowdown in the cost of living. This reverses a declining trend seen over much of 2011. However, although the cost of food and clothing has seen an improvement, budgets continue to be squeezed by the rising costs of running a family home. In October, gas prices were some 25.3 per cent higher than a year ago, while electricity prices grew by 15.5 per cent. Transport costs continue to put pressure on the inflation rate too, with the cost of getting around remaining a large driver of the headline rate of CPI inflation. Figures from the AA show the cost of unleaded petrol grew by 12.3 per cent over the year to November, while diesel prices increased by 14.6 per cent during the same period.

As well as rising outgoings – a weak jobs market further increases the pressure on family budgets – with the unemployment rate remaining elevated at 8.3 per cent during the quarter to October. With official forecasts indicating that the public sector is likely to lay off more workers than previously anticipated, there are fears that unemployment could rise to 8.7 per cent in 2012.

In addition to the November data, a specially commissioned forward-looking report compiled by Cebr predicts that the amount of disposable income available to UK families in 2012 will stabilise in 2012. Slowing inflation will help ease the pressure on household budgets, although an increase in mortgage interest costs and weak employment conditions could present a risk to spending power. Cebr therefore predicts a fall of £11 per month in December, and £8 a month in January.

Charles Davis Managing Economist, Cebr comments:

“Difficult times are set to continue for British households, as economic fallout from the on-going debt crisis in the Eurozone takes its toll on employment and wage growth prospects in the UK.

“With high unemployment set to rise further as deeper than anticipated public sector cutbacks outweigh job creation in the private sector, household spending power is likely to be held back by slow earnings growth. The rising cost of living is expected to slow further in the coming months, taking some pressure off, but household budgets are likely to be constrained for some time to come.”

Andy Clarke, Asda President and CEO, said:

“2011 saw UK families face an unprecedented budget squeeze, with the cost of basics putting immense pressure on disposable income.

“While November’s fall in the cost of living gives us optimism for 2012, fears over job security underline that for some families, times are challenging.

“Business leaders should view this as call to action by doing what British business does best – finding new ways to remove unnecessary costs from operations to hold back inflation and keep prices as low as possible.

“At Asda, our aim is to make sure that next year, our customers know we’re doing all we can to save them money everyday.”

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Posted in Press Centre on 23 December 2011