- The average UK family’s disposable income reached £160 a week in June for the first time in 2013, unchanged from the same month last year but down £5 a week from its peak in February 2010
- Weak wage growth was again a key factor, up just 1% in the year to May – one of the smallest year-on-year rises on record
- The continued rise in the rate of essential item inflation, up 0.1 percentage points to 3%, also played a role in the decline in disposable household income
- Good news for home owners as the cost of mortgage interest payments fell to 3.2% year-on-year – the lowest since November 2011
- The North West of England profits as disposable income rises £5 year-on-year in Q2
The latest Asda Income Tracker reveals that family spending power remains unchanged year-on-year in June 2013, due to rising inflation and persistently weak wage growth.
According to the latest figures, released yesterday (Monday 22nd July), the average UK family had £160 of weekly disposable income available to them in June 2013, up by £5 a week from the same month two years ago, but remaining well below its peak of £165 seen in February 2010.
A weak increase in the average UK wage was a key factor behind this stagnation in discretionary spending power, with average pay excluding bonuses up just 1% in the three months to May. This was a third of the rate of essential item inflation (3%) and only marginally better than the 0.8% growth – an all time low – seen in the three months to March.
In fact, had it not been for the recent rise in the income tax-free allowance – from £8,105 to £9,440 – household disposable income would have fallen even further, by an additional £5 a week.
The continued rise in inflation of essential items, up 0.1 percentage points to 3.0%, also added to the squeeze on household finances. The cost of gas and electricity, for instance, were up 8.3% and 7.7% respectively, compared with a year ago, while clothing prices also increased 3.1% – the highest rate since March 2012.
Petrol and diesel prices, which have been in negative or negligible growth for much of the past six months, have also started to rise year-on-year again, up 1%, putting further pressure on household finances.
There was good news for homeowners, though, with the cost mortgage interest payments falling to 3.2% year-on-year – its lowest level since November 2012.
Across the regions, there was good news for households in the North West, which witnessed a £5 increase in disposable income year-on-year. At the other end of the scale, households in Northern Ireland continue to see a decline in disposable income of £4 over the same period.
Asda president and CEO Andy Clarke said: “Although customers don’t seem to be any better off than they were this time last year, a positive rise in retail sales indicates a return to cautious spending.
“It is unlikely that consumer confidence will be fully restored until we see a significant improvement in family finances, but the good news is that the cash in our customer’s pockets appears to be stabilising.
“With the recent heatwave and two British sporting victories in the bag consumer spirits are high, hopefully leading to a brighter outlook for July.”
Rob Habron, Economist at CEBR added: “Although green shoots are emerging for the UK economy, with growth looking to have continued across Q2 2013, the economic environment remains tough for households.
“With the pace of income increases remaining below growth in the cost of living, the squeeze on household finances is ongoing. Strong price rises are still being seen in essential items such as utilities and clothing, while petrol prices are now putting further pressure on family spending power.”
For the full report, please see the ASDA website.