• Families across the UK had £194 of discretionary income in May, £4 per week less than the same month last year
  • Families with the lowest income see the biggest reduction in disposable income
  • Vehicle fuels and electricity show the greatest inflation year on year, with an increase of 7.5% and 7.7% respectively
  • Asda’s pulse of the nation insight shows that over half of customers believe their disposable income will fall again over the next month

Asda’s latest Income Tracker today revealed that in May, UK households had £194 of discretionary income available per week, which is down 1.9% from May 2016.

May’s data shows the strongest contraction in spending power since September 2013.

The latest tracker also provides a breakdown of the data by income groups splitting UK households in five equally sized groups across the income distribution. This month, the data shows that families with the lowest income have seen the biggest reduction in disposable cash, whilst those in the top bracket have stayed flat year on year.

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

Income Bracket

Weekly income

Weekly income growth

Weekly disposable income

Weekly disposable income growth

Highest income

£1,920

1.6%

£690

0%

2nd highest

£927

1.4%

£255

-1%

3rd highest

£601

1.0%

£109

-5%

4th highest

£377

0.5%

£47

-12%

Lowest Income

£179

0.1%

-£26

-28%


Gross income growth (including wages, benefits and income from investments) was still positive for four of the five income groups in May, with the highest earners seeing the largest year on year income increase of 1.6%, meaning their pre-tax income was just short of £2000 per week on average.

The lowest quintile saw no growth at all in income year on year, with an average gross income of £179 per week. Flat wage growth, the cash-freeze on benefits and rising prices for essential items and goods lead to the lowest earners having a negative discretionary income, leaving them with £26 less in their pockets each week.

In addition to the Income Tracker data, Asda’s pulse of the nation insight has shown that consumers are feeling slightly more pessimistic about the economy in June than they have in previous months. More than half of the customers surveyed said that they think their disposable income will fall further over the next month, with only 2% believing their cost of living will decrease.

83% of consumers believe that it will become more expensive to buy essential items over the next month. Compared March, close to 10% more customers feel less positive about their household finances.

This month, the cost of essential items increased by 2.3% for families across the UK. One of the main contributors was an increase in electricity prices for households. While headline CPI inflation increased to 2.9% in May – up 0.2 percentage points from April 2017 – electricity was whopping 7.7% more expensive than in the same month a year earlier. Asda’s insight has shown that over two thirds of customers think their electricity bills will continue to rise as the summer month approach.

Vehicle fuels also posted a significant increase in price at 7.5% higher year-on-year. However, price increases in fuels are down from their peak earlier this year when inflation in this category clocked in at just under 20% year-on-year. Filling up the car in May was 1% cheaper than it was in April this year.

Kay Neufeld, Senior Economist, Cebr, said: “The second consecutive month of falling family spending power confirms our expectations of a trend change in the Income Tracker. Families are faced with broad-based increases in the prices of essential goods and services as wage growth falls further behind.

“While the low oil prices help to bring down prices at the pump, households need to dig deeper into their pockets for most other goods and services. Unfortunately, the squeeze in households’ finances is expected to continue over the next months as we see little evidence that wage growth will pick up and neither have we reached peak inflation just yet.“

ENDS