Families disposable income rises
Typical UK household has more discretionary income than a year ago ASDA Income Tracker reveals.
The average UK family is £8 a week better off compared to August 2008 as inflation hits its lowest level since February 2005. As a result, the average household had £160 a week of discretionary income in August 2009, 5.2 per cent higher than a year earlier. Food price inflation fell in August from July taking it to its lowest level in three years.
According to the latest Income Tracker report, gross income rose by £4 a week in August 2009 compared with a year earlier. After tax, the average family had £1 a week more net income than in August 2008. This was the smallest annual increase in gross income since April due to a weakening of earnings growth, a continued rise in unemployment and an increase in cost of some essential items such as fuel.
The year-on-year improvement is due in part, to comparison with a period prior to the Bank of England rates cuts in which the economy was suffering from a severe slowdown in economic activity and a spike in global commodity prices.
Andy Bond, ASDA president and CEO said: “With inflation now at its lowest level in three years, it’s important that retailers pass on the savings they’re making as quickly as possible. Many of our customers are still cautious despite a year on year increase in spending power. Our job at Asda is to lower prices aggressively so we can give them the confidence to spend their hard-earned money in the run up to Christmas.”
Charles Davis, an economist at Cebr who compiles the report for ASDA, said: “The ASDA income tracker continues to show that Bank of England cuts have provided a significant boost to average family spending power. However, unemployment stands at its highest level since 1995 and is set to rise into 2010 while earnings growth is at historically low levels. Meanwhile, households have a significant debt mountain to clear, which they are continuing to address. For the first time since Bank of England records began net repayment of debt has surpassed lending in July. This combined with flat retail sales growth in August highlights the continuing cautious approach from consumers.”
Food prices fell in August month-on-month, while mortgage interest rates have almost halved in the last year. Household energy bills are also stabilising – electricity and gas prices were unchanged in August from July and were 2.4 per cent lower in August compared with a year earlier. However, the [average] price of petrol is up 23 per cent from its January low.Indications suggest that increased spending power may be used to pay off debt, as Bank of England data showed net household debt repayment in July for the first time since 1993.
A recent survey carried out by Asda showed that 48 per cent of shoppers were already buying Christmas gifts with 75 per cent claiming that it would lighten the financial burden of Christmas and spread the festive costs.
