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Inflation on essentials offsets rise in household spending power


UK shoppers saw their spending power increase in March, although this was offset by a creeping rise in inflation on several essential items.

Last month saw inflation rise to 0.1%, marking the first time in 18 months that it has turned positive. This unfortunately downplayed an average increase in the average disposable income of UK households, which last month stood at £198, a 6.3% rise compared to the same time last year.

According to the Asda Income Tracker, inflation was primarily seen in the cost of dining out, which rose 1.9%. The cost of clothing and footwear meanwhile rose a modest 1.4%.

There was a silver lining however, as the Tracker also revealed a “notable” 9.2% drop in the cost of petrol and diesel, offsetting the impact of inflation elsewhere. The cost of electricity and gas in March also fell, dropping by 3.7%. Food was another essential sector that saw a price decrease, with the average cost of groceries falling by 2.7% compared to last year.

“The sustained rise in discretionary income gives family finances a welcome boost ahead of the summer months,” an Asda spokesperson said. “While inflation has slightly increased in recent months, low overall interest rates continue to be good news for consumers.

“The outlook remains cautiously positive, despite a slow-down in wage growth across the country as a whole, which really can be seen on a regional level when we are already noticing an increase in household income.”

“While increases in inflation in recent months have weighed on growth rates, households across the country continued to benefit from robust annual increases in spending power in March,” said Cebr Economist Sam Alderson.

“While assembly elections and the upcoming referendum on EU membership provide an uncertain background for consumers, the low levels of essential item inflation and growing discretionary income should continue to provide support to both consumer spending and overall economic growth.”

Published on Tuesday 26 April by Philip Gallagher

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