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Disposable income rises for first time in 2 years


UK families were £1 a week better off last month compared to July 2011, the largest annual increase in over two years, figures released today reveal.

On average, UK households had £151 a week of discretionary income in July, a 0.6 per cent rise on last year, according to the latest Asda Income Tracker.

Easing inflation on family budgets has driven the slight improvement, with clothing, transport and food inflation all witnessing a fall over the month.

Earlier this month, the BRC-Nielsen Shop Index found that food inflation had fallen to a two-year low in July, falling 0.4 per cent to 3.1 per cent over the month.

Charles Davis, Head of Macroeconomics at Cebr explained that, while this is an encouraging improvement, ongoing pressures are still affecting consumers.

“This second month of increases on the Income Tracker is welcome news for UK families, as the average household now has the highest amount of discretionary income in 16 months,” he said.

“However it may not be all plain sailing ahead as pressures remain. There is still much underlying weakness in the labour market and unemployment is likely to stay persistently high.

“In addition, recent increases in the cost of crude oil could well feed through into the cost of living in the coming months.”

Despite the fall in unemployment to eight per cent during the three months to June 2012, a 0.2 per cent drop on the quarter and the lowest rate since June 2011, slow pay growth and economic fragility continue to cause concern.

The cost of living continues to rise as housing and utility costs increase, contributing one third to the overall inflation rate. Gas prices jumped 15.4 per cent year-on-year in June while electricity and rent prices rose eight per cent and 3.5 per cent respectively.

Asda President and CEO Andy Clarke said that the news “is a bit of light at the end of the tunnel for UK families” though conceded that, once July’s results are put into context over two years, consumers are still £8 a week down on disposable income available in 2010.

“Customers still have less in their pockets this month than they did two years ago – there’s no doubt that balancing the books is still a challenge,” Clarke commented.

“Despite an improved picture families have very real worries about unemployment and the fragility of the wider economic situation. It’s still tough out there.”

Published on Tuesday 21 August by Editorial Assistant

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