Family spending power continues to reach record levels as discretionary income reaches £201
- The average UK household had £201 a week of discretionary income in May – £13 more than in May 2015
- Year-on-year growth in spending power has now remained in double digits for over 18 months
- It is the second consecutive month discretionary income has reached £200 or over and - the highest amount recorded since the Asda Income Tracker was established in 2008
- The impact of the National Living Wage, coupled with the falling cost of essentials, provided an additional boost to families’ bank balances
UK families enjoyed another increase in spending power last month, as weekly discretionary income for May reached £201 – an all time record high for Asda’s monthly Income Tracker.
The latest data revealed that family spending power rose by £13 (7.2%) a week, compared to the same month last year - the highest rate of growth since November 2015. This increase also marks the 19th consecutive month that the growth in discretionary income has remained in double digits.
A combination of the falling cost of essential items, a drop in unemployment levels, and a boost to earnings following the introduction of the National Living Wage, all contributed to the latest rise indisposable cash.
The cost of essential items continues to decline on an annual basis as food and drink prices fell by 0.4% inMay - contributing to a year-on-year drop of 2.8%. And despite some upward pressure last month, transport costs also remain lower than they were at the same time last year.
In a further boost to spending, families were also able to make the most of spring shopping sprees, courtesy of a 0.2% fall in the prices of clothing and footwear during the month - a stark contrast to the same period last year, where the cost of these goods increased.
In contrast, Brits planning a family stay-cation were faced with increasing costs. The price of hotel stays rose by 2% compared with April – twice the increase experienced at the same point a year ago - while overall transport costs rose by 0.9% between April and May.
Looking at the labour market, falling unemployment levels and a rise in wages painted a positive picture. The rate of unemployment fell to 5.0% - the first fall in unemployment figures following five consecutive readings of 5.1%, while the impact of the National Living Wage also helped to influence growth in employee gross earnings (up 2.5%) and the expansion of net incomes (2.4%).
Shining a light on levels of inflation, Asda’s Income Tracker revealed that annual consumer price inflation remained unchanged in May, hovering just above zero at 0.3% - however, as we head into the second half of 2016, this is expected to rise steadily. Meanwhile, essential item inflation experienced a slight uplift in May but remains in negative territory at - 0.1%, indicating falling costs continuing for households.
An Asda spokesperson, said: “A rise in wages, coupled with the falling cost of essential items, ensured that families across the UK continued to enjoy a boost to bank balances last month. The amount of discretionary income recorded by Asda’s Income Tracker reached an all-time high, which is very encouraging and demonstrates continued consumer confidence.
“While costs continue to fall for UK households and spending power growth begins to accelerate once more, the long term picture is more difficult to predict as we wait to see the impact of the EU Referendum’s decision on the nation’s pockets.”
Sam Alderson, Economist, Cebr, said: “The introduction of the National Living Wage and the continuation of low levels of inflation have provided households with yet another welcome boost to spending power.
“May marks the fastest annual growth in 2016 and will likely provide some much needed security to households facing the uncertain outcome to the UK’s referendum on membership of the EuropeanUnion.”