Falling food prices mean families are £4 better off a month according to the Asda Income Tracker
The average UK household had £171 a week of discretionary income in May 2014, up £4 a week year-on-year
The latest increase is the eighth consecutive month that families have seen their discretionary incomes rise year on year
Household budgets were bolstered by a sharp slowdown in essential items inflation, particularly the cost of food, clothes and mortgage interest payments. In addition to this, the cost of plane tickets fell 3.2% in time for the half term break.
The latest Asda Income Tracker has revealed that family spending power continued to rise year on year for the eighth month in a row in May, reinforcing the economy’s steady path towards recovery. According to the latest figures, released today, the average UK family had £171 a week of discretionary income – the income left once taxes and the spend on essentials like rent, utilities and bills have been deducted – in May 2014, £4 a week higher than a year before.
Food prices declined year on year for the first time since 2006 last month, easing the pressure on family finances and contributing to a sharp slowdown in the rate of annual inflation on essential items, which dropped to just 1.3% compared to 1.7% last month. The cost of clothes and mortgage interest payments fell 0.1% and 0.6% respectively over the year, providing families with even more financial relief. Travel was also more affordable in May as the cost of plane tickets fell 3.2% in time for the half term break – a stark contrast to the 22% rise in airfares seen between April and May 2013.
It was another record month for the labour market too, as the latest data saw the fastest rate of employment growth since 1989, with an additional 780,000 people in work compared to the same time last year. This also resulted in a huge fall in unemployment, which dropped to its lowest rate since late 2008 and now stands at just 6.6%.
The only factor keeping a lid on discretionary incomes rising further was a slight slowdown in wage growth, which has now dropped to just 0.9% from a high of 1.4% earlier in 2014.
Commenting on the findings, President and CEO of Asda, Andy Clarke, said: “As the country sees discretionary income rise for the eighth consecutive month, my confidence continues to grow that there is a strong and sustained recovery happening in the UK.”
“The rate of essential item inflation is still slowing thanks to a competitive market and family spending power is on the up. I’m interested to see if next month’s regional breakdown of the tracker will show if this continued growth is being felt in every region.”
Rob Harbron, Senior Economist, Cebr, said: “The latest fall in essential item inflation and the slowdown in inflation are both providing welcome boosts to household spending power. Although wage growth slowed recently, a strengthening economy is expected to push up earnings over 2014.”