Family spending power has fallen by £4 a week in May 2012 – the lowest rate of year-on-year decline since November 2010, according to the latest Asda Income Tracker.
The results reveal the average UK family has £146 of weekly disposable income available to them, 2.4% down on the same period last year and the smallest annual decrease since November 2010.
The slight improvement in disposable income recorded for May 2012 is largely driven by lower levels of inflation putting less of a squeeze on family budgets. Annual CPI inflation fell to 2.8% in May, the lowest level since November 2009.
On a positive note, key items such as food and fuel have seen lower levels of inflation than previous months – with prices up 3.3% and 0.8% respectively compared to the same time last year. However annual inflation on utilities such as electricity and gas remain stubbornly high at 8.0% and 15.4%. Linked to this, the cost of housing and household services contributed a significant 0.8 points to May’s overall inflation rate.
Despite the lessening impact of inflation on household budgets, high unemployment and slow pay growth continues to hold back income and create concerns for families. Benefit claims for May 2012 rose by 8,100 suggesting weaker labour market conditions. And although annual pay growth rose marginally to 1.8% in May, this is still far behind the pre-recession average of around 4%.
Andy Clarke, Asda president and CEO, said: “Despite the modest improvement month on month, the reality of two years of continuous decline means families don’t feel any better off.
“They still have less in their pockets this month than they did a year ago – and despite an improved picture they have very real worries about unemployment and the potential impact of the wider economic situation on their finances.
“I’m pleased to see our efforts to keep the cost of feeding the family down and filling up their cars with lower-priced fuel is putting much-needed cash back in our customers’ pockets. But the rising costs of utilities suggests more needs to be done by other sectors to help families balance the books.”