Asda Income Tracker: disposable income falls back to decline in February

The latest Asda Income Tracker has revealed that family spending power fell by £10 a week in February 2012 – reversing the improving trend seen in recent months. This left the average UK family with £144 of weekly disposable income – 6.3 per cent down from the same time last year.

Income growth remained weak at just 1.7 per cent over the year to February and when this is added to high inflation on the cost of basics, family spending power is being squeezed in both directions. The official measure of the rising cost of living slowed notably in January, as the consumer price index (CPI) rose over the year by 3.6 per cent. This is the second consecutive sharp slowdown, and the largest two-month fall in the rate in three years.

Balancing the two conflicting elements, family income growth is still very fragile, with the improving cost of basics overshadowed by the high number of workers becoming unemployed, and those that are in work seeing small year on year salary increases, well below inflation.

Earnings growth fell back to the slowest pace in 18 months – just 1.7 per cent. The last time it was lower than this was July 2010. Unemployment stood still in the three months to January, unchanged from the previous reading. This is a substantial worsening from a rate of 7.9 per cent in the same period the year before – a trend that will continue to pull household finances away from growth.

Despite some improvements in the cost of utilities and transport, they are two of the main factors putting pressure on discretionary spend. The cost of electricity and gas remains well above that of last year, and petrol and diesel prices by 4.2 and 4.7 per cent respectively over the last year.

Andy Clarke, Asda President and CEO, said:

“It’s disappointing to see a reverse in improvements to the cost of basics seen in previous months, putting a further pressure on already squeezed family budgets.

“I take my lead from what our shoppers tell us, and I think the Chancellor has faced the same challenge that families face every day – balance the books, but find smarter ways to limit the impact.

“Asda mums told us loud and clear that the single most important thing for them was a cut in the price of fuel, so they’ll be disappointed the planned duty rise in August still stands but pleased at changes to personal tax allowances that will give them more to spend on their families.”

Charles Davis Managing Economist, Cebr comments:

“The latest slowdown in inflation is good news for the cost of living and household budgets, although the headline rate is still above the Bank of England’s 2.0 target rate and the price of oil remains persistently high.

“While inflation is likely to fall further over the coming months, resulting in smaller declines on the Asda Income Tracker, weakness is expected to remain in the UK labour market for some time and earnings growth to be only slow over the coming year. As a result, real income erosions are likely to continue for a third year in 2012.”
Last week (Thursday 15th March) Asda launched a new petrol price comparison site, powered by independent price checker www.petrolprices.com, to enable drivers across the UK to find the lowest priced fuel before they fill.

The supermarket aims to save Britain’s 38m drivers millions of pounds at the pumps each year by publishing the highest, lowest and average prices in every one of the 195 towns in which it operates a filling station. It will also publish the price it charges for both unleaded and diesel to allow drivers to check and compare prices within a three mile radius of their local Asda forecourt.

Source : Asda Press Centre
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