Family spending power hit a 12-month low last month as disposable incomes continue to contract, according to new data released today.
In April, the average UK family had £155 a week of discretionary spend, down £1 a week on the same period last year and £10 a week from its peak in February 2010 as rising unemployment and the lowest wage growth on record impacted budgets.
According to the Asda Income Tracker, April saw the steepest decline in wage growth since the start of the recession in 2008 as average pay crept up 0.8 per cent in the year to April, the lowest recorded rise since the Office for National Statistics began comparing such figures in 2001.
Reporting its second consecutive year-on-year fall, discretionary income is now significantly below its £165 peak in February 2010.
Over the past year, UK unemployment has soared by 15,000 to 2.52 million as the jobless rate reached 7.8 per cent, while the number of unemployed young people aged 16 to 24 now stands at 958,000, a rate of 20.7 per cent.
Rising utility prices were also “a key factor”, the grocer said, as gas prices leapt 8.3 per cent year-on-year, the highest rate since August 2012.
Asda President and CEO Andy Clarke said that, while consumers should remain cautious, there are factors which are easing pressure on spend.
“Whilst our Income Tracker records a drop in national wage growth, the increase in the personal tax allowance should relieve some pressure although it will take time before we see the knock on effects in consumer spending,” he explained.
“This is consistent with the view that the economy is showing signs of recovery.”
Last month, the income tax free allowance rose 16.5 per cent to £9,440, boosting net household income by 2.1 per cent to £582 and impacting discretionary spend which would have otherwise declined by an additional £5.
Meanwhile, the cost of fuel has dropped 3.7 per cent year-on-year, though Rob Habron, Economist at CEBR, warned that more needs to be done to help cash-strapped consumers.
“A higher tax free personal allowance and lower inflation on some essentials, such as petrol, have helped this month to ease the stress on household finances,” he said.
“However, ongoing very slow wage growth and high unemployment are preventing any real gains to discretionary spending power.
“The squeeze on household incomes has returned in 2013 despite the gradually improving economy.”