The average UK family had £1 a week less to spend on shopping over the last 12 months, new research conducted on behalf of Asda has suggested.
The fall in the UK’s weekly discretionary household income was driven by rising inflation and persistently weak wage growth, according to The Asda Income Tracker.
The tracker recorded that the average UK family had £157 of weekly discretionary income available to them in May 2013, down from £158 in the same month last year, and well below its peak of £165 in February 2010.
“The reality of three years of near continuous decline in disposable income means families don’t feel any better off”
Andy Clarke, Asda
A household’s discretionary income is calculated as the total amount of money a household has left after paying bills and taxes.
The average wage increased just 0.9% in the three months to April – the second lowest rise on record since the Office for National Statistics began collecting comparable figures in 2001.
The Organisation for Economic Co-operation and Development (OECD) recently said food prices in April in the UK were 4.6% higher than the same month a year ago.
Gas and electricity prices increased 8.3% and 7.7%, respectively compared with a year ago, while mortgage interest payments and food inflation were also both up 4.3% on the year.
The data showed some relief for motorists, however, with the cost of fuel falling 2.9% year-on-year.
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Had it not been for the April rise in the income tax-free allowance – from £8,105 to £9,440 – household discretionary income would have fallen even further, by an additional £4 a week.
“Last month the increase in personal tax allowance relieved the pressure on family budgets, as green shoots in the economy started to emerge. However, the reality of three years of near-continuous decline in disposable income means families don’t feel any better off,” said Asda president and CEO Andy Clarke.
“The fluctuation of disposable income levels throughout 2013 further demonstrates the fragility of spare cash available to families, which is crucial to stimulating economic growth.”
Rob Habron, economist at the Centre for Economics and Business Research, who conducted the research, said: “Household incomes are struggling to keep pace with the rising price of essentials, leaving discretionary spending power £8 per week lower than its peak seen in 2010.
“Although reduced motor fuel prices, higher tax-free personal allowances and a solid job creation in the private sector have helped support household finances, the weakness of earnings growth and above-target inflation remain on-going pressures.”