“Tale of two halves” for families as disposable incomes grow, but at a slower rate
- The average UK household had £171 a week of discretionary income in June 2014, up £1 a week on June 2013
- Discretionary incomes rose year on year for the ninth consecutive month, but at a slower rate than previous months
- Mixed picture across the regions as the East and West Midlands bucked the trend with discretionary incomes rising by £6 and £7 respectively while incomes in the South West fell by £1
The latest Asda Income Tracker shows that family spending power increased year on year in June for the ninth month in a row as discretionary incomes – the income left once taxes and the spend on essentials like rent, utilities and bills have been deducted – in June 2014, were up £1 a week on the same month a year before.
The boost in discretionary incomes came as welcome news for families who benefited from the positive year on year effects of a 3% fall in the cost of filling up their cars, food prices remaining flat and a 0.3% decrease in their mortgage interest payments. The lowest level of unemployment since 2008 and April’s increase in personal tax allowance have also helped to keep the tracker in positive territory.
While families were better off again this month, their discretionary incomes were prevented from rising further by three main factors – household utility prices (gas, fuel and electricity) remaining well up on a year ago, an increase in the rate of essential item inflation to 1.6% and slow wage growth. This increase in inflation was partly down to clothing retailers postponing their summer sales, which typically happen in June.
Across the regions, it was a varied picture.
- The Midlands: Family spending power in the East and West Midlands outperformed the rest of the nation, increasing year on year by £7 and £6 respectively thanks to a booming manufacturing sector
- London: Due to its dependence on the finance and business services sector, which continue to see year-on-year declines in average pay, London was no longer the engine of growth it once was as incomes rose by a modest £1 in line with the national average
- As with the capital, Scotland’s reliance on the banking and business services sector meant family spending power in the region was on hold
- South West: Families in the South West were the only ones to experience a fall in their spending power, down £1 year on year
- The rate of growth in discretionary incomes in Northern Ireland slowed by 6.9 percentage points in the second quarter, meaning families have just £82 a week spare cash – the same as the past three years in this same quarter.
- Wales: Families in Wales enjoyed a better than average rise of £2 in their discretionary incomes
Commenting on the findings, President and CEO of Asda, Andy Clarke, said:
“This month’s income tracker is a tale of two halves. Whilst we are seeing the ninth consecutive month of growth – this growth is slowing. And over the past month families have not felt the same level of benefit in their household budgets that the positive headlines about economic recovery that we’ve seen in recent weeks would suggest.
“Whilst some regions continue to step on in their economic recovery – such as London and the Midlands – others, such as the South West have actually seen a step back this quarter indicating that recovery still remains a postcode lottery.
“Although I know that for shoppers a pound a week extra in their pockets will still make a difference, equally, we must recognise that, as a week of sunshine doesn’t make a summer, there will need to be greater, prolonged consistency in our economic indicators before we can claim a full recovery.”
Rob Harbron, Senior Economist, Cebr, said:
“Although London is often cited as the engine of the current UK recovery, the latest Asda Income Tracker regional results highlight how this economic expansion is not yet feeding through into the household finances of many, even for those living in the capital.
“Households around much of the UK are facing the twin squeezes of very weak wage growth and rising inflation.”