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Disposable income is still down on the same period last year, research says

Household disposable income remains stable but has decreased compared with the same period last year, research commissioned by Asda has found.

The average UK household had £160 a week of disposable income in July 2013, down £1 a week from the same month last year and down £5 a week from its peak in February 2010, Asda’s Income Tracker reported today. Month on month, disposable remained the same, staying at its highest level in 2013 so far.

Despite a marginal fall in the inflation rate of essential items to 2.9%, the cost of living continued to rise faster than net incomes (2.2%), adding to the squeeze on family budgets. Over the past year, utility costs have risen by 8.2% - the fastest annual increase in home energy costs since August 2012. Had it not been for the rise in the income tax-free allowance in April – from £8,105 to £9,440 – household disposable income would have fallen even further, by an additional £5 a week, the report found.

“Consumer optimism is on the increase as families begin to feel less gloomy about the economy and their finances – despite the slight drop in disposable income. A ‘feel-good’ summer has contributed to a boost in retail sales, but we can’t ignore the fact that the squeeze on income growth and rising cost of living continue to pull at consumer purse strings,” said Asda CEO Andy Clarke. 

Rob Harbron, senior economist at Cebr, which conducted the research, said: “Growth appears to be picking up in the UK economy, but concerns remain on how sustainable this will be. Highlighting these concerns, the Asda Income Tracker shows the extent to which household finances are still under pressure. With earnings growth remaining very weak, rapid increases in the cost of living continue to erode family spending power.”