Family spending power fell by £10 a week in March 2012 – reversing the improving trend seen in recent months, according to the latest Asda Income Tracker.
This left the average UK family with £144 of weekly disposable income, 6.5% down from the same time last year.
The official measure of the rising cost of living was up in February, as the consumer price index (CPI) rose over the year by 3.5%, well above average earnings growth which remained weak at just 1.6%. When slow income growth is added to high inflation on the cost of basics, it’s clear that family spending power is being squeezed in both directions, resulting in disposable income levels eroding further, said Asda.
As well as those that are in work seeing small year-on-year salary increases, well below inflation, tough conditions in the labour market mean unemployment is still having an impact despite slight year-on-year improvements in the headline rate. Balancing the two conflicting elements, family income growth is still very fragile, with the improving cost of basics overshadowed by the high number of workers becoming unemployed.
Despite some recent improvements in the cost of utilities and transport with a drop in wholesale prices and energy providers making cuts to bills in March, they are still two of the main factors putting pressure on discretionary spend. The cost of electricity and gas remains well above that of last year and are rising again by 8.1 and 16.1 respectively in March. Petrol and diesel prices by 4.2% and 4.7% respectively over the year, with prices at the pump hitting an all-time high during the month.
Spare cash is also declining year-on-year across every UK region, with annual drops remaining severe in the first quarter of the year. The north-west of England saw strongest pressure on family budgets over the past year – with employment conditions in the region reducing spending power. Northern Ireland continues to suffer steep declines, with the cost of essentials making up a larger proportion of family budgets, and therefore most impacted. Families in the province had just £83 a week of discretionary income in Q1 2012 – just over half that of the national average.
London and the south-east fared relatively well over the first quarter, with essential spending making up a smaller proportion of household budgets. Discretionary spend in London was £184 per week in Q1 2012, compared to a UK average of £144, and four times higher than cash available to families in north-west and Northern Ireland. This gap continues to widen, demonstrating the difference in economic challenges faced by families across the UK.
Andy Clarke, Asda president and CEO, said: “It’s worrying to see the cost of essentials creeping back up, increasing the demands on family budgets and putting pressure income growth.
“Unemployment drove the continued drop in disposable income in March and throughout the quarter, with a growing divide between the nations and regions.
“We’re firm in our commitment to help tackle this in 2012, by creating new jobs, working with new communities and bringing Asda value where it matters most to families across the UK.”