Asda Income Tracker: modest increase in disposable income in August

The latest Asda Income Tracker has revealed that family spending power improved very slightly in August 2012, with a third consecutive, albeit marginal, annual increase in the Income Tracker. More than one increase in a row has not happened since September 2010. According to the latest figures the average UK family had £149 of weekly disposable income available to them in August 2012.

- UK families were £2 a week better off in August 2012 compared to the same month a year earlier, the largest annual increase since February 2010

- The average UK household had £149 a week of discretionary income in August 2012, 1.4pc up on the year before

- Improvements driven by lower inflation and better-than-expected unemployment figures but uncertainty in the wider economy and labour market continues to cause concern

The slight improvement in disposable income recorded for August 2012 is driven by easing inflation on family budgets – with clothing inflation falling over the month and vehicle fuel prices remaining down on last year. The unemployment rate remains elevated, rising to 8.1 per cent during the three months to July 2012 – but this is a decrease of 0.1 percentage points on the quarter.

This month’s annual increase in discretionary incomes is a result of a downward inflationary trend since the end of 2011, as well as reductions in the unemployment rate in 2012, following a general improving trend from September last year. Income erosions have been shrinking since then as price inflation for essential items has fallen back. But despite the lessening impact of inflation on household budgets, when the month is put in context over two years UK families are still £9 a week down on disposable income available in 2010 – budgets are still under pressure.

Slow pay growth and a fragile economic outlook continues to hold back income growth and create concerns for families as the UK economy languishes in recession. Increased price pressures from the cost of food and fuel could emerge in future months, as crude oil and food commodity prices rose in August.

Although housing and utility costs remains a key contributor to the headline 2.5 per cent inflation rate, electricity and gas bills were unchanged in August 2012. This compares to a rise in the same month a year ago, helping to bring down the headline rate. However bills are scheduled to increase in the coming months, which is likely to keep inflation elevated.

The cost of petrol and diesel rose markedly in July and August, putting upward pressure on the inflation rate. Prices at the pump remain marginally down on last year.

Asda president and CEO Andy Clarke said:
“The good news continues for UK families for now at least – with more cash in their pockets than a year ago.

“However there’s no doubt that budgets are still under pressure with the two-year view showing a worsening picture.

“Families are still cautious – they know that running a home in winter costs more, and have real concerns about maintaining their standard of living for the rest of 2012.

“We are committed to holding down the cost of the basics – particularly food and fuel – to help customers stretch their budgets that little bit further.”

Rob Harbron, an Economist at Cebr comments:
“Continued annual improvements on the Asda Income Tracker are welcome news for UK households and highlight a recent easing of conditions for the squeezed consumer.

“Despite this, risks ahead still remain. Utility companies have announced price hikes for later in the year, while the rising cost of crude oil is likely to push petrol prices up again in the coming months. At the same time, economic conditions remain uncertain, keeping pay growth subdued.”

Source : Asda
http://your.asda.com/press-centre/disposable-income-continues-to-improve-but-cautious-times-ahead