Families no better off than a year ago
Increased cost of essentials and weak earnings growth piles pressure on family finances.
The average UK family was no better off in December 2009 than a year earlier according to the latest Asda Income Tracker, marking the first time since March 2009 that family spending power has decreased.
As a result, the average UK household had £163 a week of discretionary income in December 2009, 0.1 per cent lower than a year earlier and a sizeable reduction from the six per cent year on year increase seen in November 2009.
One of the key drivers behind the fall was the continued weakness in earnings growth. Gross incomes rose by just 1.6 per cent year on year in December 2009, which is significantly below the previous year’s increase of 2.7 per cent for the same period. Data from December 2007 presents an even starker contrast – earnings growth then was rising by 4.5 per cent year on year.
The spike in transport costs has also contributed towards a rise in annual inflation, which in December recorded the largest one month increase on record. The upwards trend in transport costs is expected to continue well into 2010, which will pile further pressure on family finances.
The decrease in mortgage interest payments eased off in December, down 27.6 per cent year on year compared to a 41.4 per cent drop in November. This, coupled with an increase in the cost of most household essentials, has further added to the fall in spending power in December.
Charles Davis, an economist at Cebr who compiles the report for Asda, said: “The Asda income tracker stalled in December as inflation recorded the largest one month gain on record. Family spending power decreased for the first time since March 2009, after several months in which spending power was boosted by lower mortgage rates and low inflation. However, the increased cost of essential items, notably transport costs, coupled with weak earnings growth is putting downward pressure on discretionary family income growth.”
Andy Bond, Asda President and CEO said: “Despite many city economists predicting Britain will pull out of recession this week [GDP figures are out on Tuesday], the Asda Income Tracker shows family finances are still under considerable pressure.
“2010 is going to be a tough year for our customers; therefore we must do everything in our power to lower prices, and help ease the strain.”
Data from the Office of National Statistics revealed that average earnings including bonuses increased by 1.8 per cent over the three month period to November compared with the same period a year earlier. This was up slightly from the upwardly revised 1.7 per cent growth in October. Public sector earnings grew by 2.7 per cent year on year compared with 1.3 per cent growth in the private sector.
Over the three months to November, the unemployment rate remained unchanged from the three months to August at 7.8 per cent. However, while the rate of deterioration in the labour market may have eased, concern over weak earnings growth continuing in 2010 may negatively affect the labour market.
