Asda Income Tracker: Increase in disposable income slows down

Asda Income Tracker shows a slight improvement in disposable income year on year:

-UK families were £1 a week better off in October 2012 compared to the same month a year earlier, but that is £13 less than two years ago.

-The average UK household had £146 a week of discretionary income in October 2012, 0.5% up on the year before.

-Although this is the fifth consecutive month of annual growth, it is a slowdown from the rise seen in September.

-It follows a sharp rise in inflation in October to 2.7% from a 34-month low of 2.2% in September, taking the rate back up to its highest since May 2012

The latest Asda Income Tracker has revealed that family spending power improved for the fifth consecutive month in October, but at a much slower rate than seen previously.

The past five months of rising real discretionary incomes follows 19 months in a row of real discretionary income declines previously. The latest figures show the average UK family had £146 of weekly disposable income available to them in October 2012 – £1 a week better off than the same month last year.

It is a slowdown from the rise seen in September at a 0.5% annual increase and shows how financial conditions are remaining tough for UK families.

Despite the rise, when the month is put in context over two years UK families are still £13 a week down on disposable income available in 2010 – budgets are still under pressure.

The slowdown in growth in spending power is driven by a rise in consumer inflation in October to 2.7%, and although falling unemployment has helped to mitigate some of the effects of the rising cost of living, earnings growth remains very weak – well below inflation at 1.9% in the three months to September.

The latest inflation rate moves further away from the Bank of England’s target of 2%. Inflation on the broader retail price index stood at 3.2% in October, up from September’s 2.6%.

The main reasons for the rise are the increase of tuition fees to £9,000; poor harvests leading to food price inflation at its highest rate since April 2012 and mortgage interest payments rising by 6.6% from a year earlier.

Another pressure is the announcement by the big six energy providers which plan to hike prices in November, December and February, following SSE’s increase in October.

The numbers show that conditions are not as difficult as they were in the second half of last year, and first half of this, but significant increases to incomes haven’t yet come through. With further pressures on the horizon family incomes are likely to remain constrained for some time.

Asda president and CEO Andy Clarke said:

“For families the mixed picture continues, with improvements in disposable income seen during the summer months almost wiped out by rising energy prices and inflation back on the rise.

“We’re committed to help tackle this in the run up to Christmas, by holding down the price basic groceries like bread and eggs, creating more opportunities to work and bringing Asda value where it matters most to families across the UK.”

Rob Harbron, an Economist at Cebr said:
“The latest movement in the Asda Income Tracker illustrates how economic conditions are remaining tough for UK household finances.

“With inflation on the rise again and further cost pressures in the pipeline, the cost of living looks set to continue growing faster than earnings for some time.”

Source : Asda
http://your.asda.com/press-centre/increase-in-disposable-income-slows-down