60% of UK families’ spending power falls year on year as the average growth continues to slow

  • Families had £202 of discretionary income in February, £3 more than the same time last year and £2 less than in January
  • Asda Income Tracker reveals that three out of five income groups in the UK are now in negative spending power growth
  • Fuel prices rose even further in February up nearly 20% year on year
  • New customer data shows that nearly 50% of consumers think their disposable income is set to fall

The latest Asda Income Tracker revealed that in February, families had £202 of disposable income available per week, which is 1.7% up from February 2016.

Even though the data showed disposable income was up year on year, growth in the Income Tracker was only 1.7%, the weakest annual growth rate since June 2014.

The latest report can be found here:

The latest tracker also provides a breakdown of the data by income groups – or quintiles - splitting UK households in five equally sized groups across the income distribution. Despite the overall average spending power still showing positive growth from the same time last year, three out of five quintiles have shown a decline year on year, with the lowest income households, having a spending power of £-23, a negative 18% growth.

Income Bracket

Weekly income

Weekly income growth

Spending power

Spending power growth

Highest income

£1,821

2.30%

£688

2%

2nd highest

£884

1.90%

£264

2%

3rd highest

£580

1.50%

£111

-1%

4th highest

£369

0.70%

£56

-6%

Lowest Income

£178

0.20%

-£23

-18%


The below chart shows the average weekly income along with spending power and growth in spending power year on year of each income group:

Data from the latest wave of the ONS’ Wealth and Asset survey show that the wealthiest quintile had the largest debt at £4,900 though this is only 5% of their total financial wealth. Households in the lower income bracket had a lower absolute level of debt at £1,700 which, however, is equal to 340% of their total financial wealth and therefore a much greater financial burden.

Despite a positive monthly trend in year on year income growth, Asda’s pulse of the nation research suggests customers have a less positive outlook on the future of their disposable income. 47% said they believe their disposable income is likely to remain the same, 46% said they think it will fall and only 6% think that they will see an increase in spending power.

Once again, there has been a significant spike in vehicle fuel prices year on year, this month by 19.1%. Similarly to last month, this was due to a combination of currency movements and a spike in worldwide oil prices. Besides higher prices for fuel and for transportation in general, an increase in housing and utility bills contributed to inflation in February. In combination, these factors pushed the rate of inflation above the Bank of England’s 2% target rate for the first time since 2013 to 2.3%. Besides higher inflation, slowing wage growth further added to the downward pressures on discretionary income growth.

The same group were also asked by Asda what they think will happen to the cost of living over the next month. Only 1.6% of respondents believe that their cost of living will fall, while 81.2% are certain their cost of living will increase going forward.

Kay Neufeld, Economist, Cebr, said: “In February the rate of inflation exceeded the Bank of England’s target rate of 2% for the first time in over three years. Over the next months, we expect the cost of living to increase further as the effect of the weak pound and higher oil prices continue to exert upwards pressure on inflation.

“In combination with falling wage growth, this means that families will actually see their spending power decrease over the next months. This will especially be felt by lower-income households, who spend a larger share of their budget on essentials such as food and clothing. As a glimpse of things to come, we’ve seen discretionary incomes decline for three out of fives households this month, the first time this has happened since June 2014.“

ENDS