Press Centre

Utility costs continue to put pressure on disposable income but a glimmer of hope ahead of Christmas

UK families £13 a week worse off in October 2011 than in 2010

  • October saw a £13 a week fall in family spending power compared to the same month last year – a slight month-on-month improvement
  • Average UK household had £164 a week of discretionary income in October, 7.1 per cent lower than a year earlier
  • Worsening employment conditions erode family spending power

The latest Asda Income Tracker has revealed that family spending power fell by £13 a week in October 2011, leaving the average UK family with £164 of weekly disposable income – 7.1 per cent down from this time last year. While this represents a year-on-year decline it is an improvement on the previous month, with further improvements expected up until Christmas.

With the festive season fast approaching, the annual inflation on the consumer price index dropped off in October, falling back two percentage points to 5.0 per cent, signaling a downward trend in inflation. However, budgets continue to be squeezed by the rising costs of running a family home. In October, gas prices were some 24.1 per cent higher than a year ago, while electricity prices grew by 14.9 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 14.3 per cent over the year to October while diesel prices increased by 15.1 per cent during the same period.

In addition to the October data, a specially commissioned forward-looking report compiled by Cebr predicts that the amount of disposable income available to UK families in December will be £8 lower than in December 2010. This represents another year-on-year decline but an improving picture month-on-month, suggesting the rate at which family spending power is eroding is slowing.

The Income Tracker has shown annual declines in average family spending power every month through 2010 and 2011. Although the pace of year-on-year decline is expected to ease off in the run up to Christmas, Asda’s own research* shows that people are reluctant to spend what they do have. Its Pulse of the Nation Survey, carried out last month said;

  • Almost half (43pc) of Asda customers are worried about the cost of Christmas
  • Parents are more worried that are more worried than non-parents, with a quarter (25pc) of parents cutting back, and a fifth (21pc) battling inflation by sticking to the same budget as last year
  • The ‘squeezed middle’ are more concerned about Christmas spending than those at the top and the bottom of the socio-economic scale – with over a third (4pc)

Charles Davis Managing Economist, Cebr comments:

“Worsening employment conditions, alongside the persistently elevated rate of inflation, are continuing to erode household real incomes and family spending power.

“Although inflation is expected to fall back, with the Bank of England expecting the headline rate to reach below 2.0 per cent by the end of next year, weakness will remain in the labour market. As such, while the Income Tracker is likely to show smaller decreases over the coming months, UK households will remain under pressure for some time.”

Andy Clarke, Asda President and CEO, said:

“With youth unemployment at an all-time high, there’s no doubt that creating jobs has to be the main priority to get Britain back on track.

“In addition to job security, the cost of basics – fuel and utilities in particular – remain the top of our customers’ agenda. The fact is people still have less money to spend now than they did a year ago.

“That said, I welcome the fact that disposable income shows a slight improvement from last month. We know this will help ensure families can better afford the Christmas they deserve.”

Download the full report

Posted in Press Centre on 24 November 2011