ASDA income tracker reveals slowdown in the nation's spending power

Asda’s latest Income Tracker has revealed that UK families welcomed another double-digit increase in spending power last month. As employment levels continued to rise (1.9% year-on-year), disposable income reached £194 a week, up £13 compared to the same time last year.

* The average UK household had a weekly disposable income of £194 in December, up £13 on December 2014
* Annual growth in spending power slowed to its lowest rate for 14 months – due to a slow down in wage growth and a slight increase in inflation
* Some regions told a different story – London’s spending power remained highest. The East of England experienced the biggest growth and closed its gap on London, while households in the North East saw the smallest rise

However, in spite of the welcome boost to wallets, this 7.2% year-on-year growth in spending power marked the lowest percentage increase since October 2014. This was due to the recent slowdown in wage growth and a slight increase in inflation.

The figures also paint an interesting picture regionally. While the rise in disposable income slowed across the UK during the fourth quarter of 2015, all but two areas – the North East and Northern Ireland – enjoyed double-digit increases. When it comes to weekly spending power, households in London led the way with discretionary income reaching £259 – up 5.8% year-on-year. However, an impressive £20 rise for families in the East of England led to disposable income reaching £218, and it closing the gap on London.

Northern Ireland experienced the strongest year-on-year growth (10.5%), boosted by a sharp fall in the price of some essentials, and a rise in employment over the past 12 months. In Scotland, the outlook was a little less positive, with slowing wage increases reducing the rate of disposable income growth to 5.6%, 1.6% lower than the national average.

Across the country, inflation reached its highest level (0.2%) since January 2015. However, the overall rate of inflation for the last twelve months stood at 0% – the lowest annual level since 1950, when records began. In addition to this, essential item inflation remained negative at -0.1%, with shoppers able to make the most of a fall in food prices between November and December (0.2%); helping to ease stress around entertaining expenditure in the lead up to the busy festive season.

In the final month of 2015, the cost of transport also hit families’ wallets. While fuel prices fell by 11.4% year-on-year, airlines made the most of the demand from UK travellers looking to escape the cold at Christmas. In fact, airfares increased by a whopping 46% between November and December – the largest December price hike seen since 2002.

It was a different story for those opting to stay home for a traditional Christmas. Pressure at the petrol pump was eased as Asda led the way by dropping its petrol to £1 ahead of the festive season. Setting a path for other petrol retailers to follow, this helped to contribute to a 3.4p drop overall in the price per litre of petrol between November and December.

Chief Executive Andy Clarke, said: Andy Clarke Asda President and CEO said: “Throughout 2015 falls in commodity prices and a strengthening pound contributed to higher discretionary income in households across the UK. We’ve also passed a milestone for the British economy, with inflation remaining at zero for a full calendar year for the first time since records began. Despite these positive economic indicators, spending patterns remain erratic. Although falling vehicle fuel costs are putting extra pounds in consumers’ pockets, this doesn’t necessarily translate to an increase in household spending.

“It’s encouraging to see that the regional picture was positive overall, but with varying contributing factors. Northern Ireland again experienced the fastest growth in discretionary income, but still remained disproportionately behind the rest of the UK. In comparison Scotland’s growth slowed as a result of increased pressure on the public sector and the price of oil.”

Sam Alderson, Economist, Cebr, said: “Against a backdrop of global economic turbulence, households across the UK continued to see spending power head higher, supported by another month of negative essential item inflation.

“Global growth concerns have already sent oil prices lower and are likely to hold interest rates lower for longer. While this should help provide further boosts to spending power in 2016, the uncertainty means that families can be forgiven for exercising some caution in terms of spending any additional spare cash.”

Source : ASDA Press Release
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