UK families’ spending power returns to growth after three months of decline

  • Families across the UK had £199 of weekly discretionary income in July, just under £1 more than in the same month last year
  • Consumers aged 65 and over still see negative growth in their spending power year on year
  • Higher electricity prices hit UK households, causing a slower growth in disposable income
  • Asda’s pulse of the nation insight reveals that three quarters of customers believe their cost of living will increase over the next month
  • Asda has cut the price of over a thousand branded and own brand products in its current Rollback campaign

Asda’s latest Income Tracker today revealed that in July, UK households had £199 of discretionary income available per week, which is up 0.5% from the same month in 2016.

The July data shows some relief for families, as they see the first growth in spending power for 4 months. However, this month the data shows that elderly households are being hit harder due to slower income growth and higher electricity prices.

The latest report is availible here:

The latest tracker provides a breakdown of the data by age groups splitting UK households in five segments evenly by age. This month, the data shows that despite the UK average showing growth, those over the age of 65 have seen a decline in their weekly disposable income compared to July 2016.

The below chart shows the average weekly gross income along with spending power and growth in spending power year on year for each age group. Spending power, or discretionary income, is calculated as gross income less taxes and essential spending.

Age Bracket

Weekly gross income

Weekly income growth

Weekly discretionary income

Weekly discretionary income growth

Under 30s

£789

2.3%

£158

0.0%

30-49

£978

2.5%

£249

2.0%

50-64

£907

2.3%

£269

0.8%

65-74

£650

1.6%

£213

-1.0%

75+

£469

1.5%

£175

-0.7%


Headlines from this month’s age data:

  • Those aged 30-49 have the largest weekly gross income
  • Those aged 50-64 have the highest spending power each week, as they have lower costs
  • Disposable income for those ages 65+ is in negative growth year on year
  • Under 30’s have the lowest disposable income with no growth year on year

Each age group saw an increase in their weekly gross income in July, however those below the age of 65 saw faster growth than those 65 and over.

Those aged 30-49 have the largest weekly gross income; however their disposable income was not the highest due to their cost of living being greater than the other age groups.

The increased cost created additional pressure on families’ spending power, and those aged 65 and over are hit the hardest as they see a decline in their disposable income year on year.

While headline CPI inflation remained at 2.6% in July – electricity was a massive 9% more expensive than in the same month in 2016 and 1.3 percentage points more than reported in June.

An Asda Spokesperson said: “We know that September is a balancing act for customers with the end of the summer holidays and families getting ready to go back to School and University.

“Our latest Income Tracker data shows that costs are increasing for families which is why we have launched a new Rollback campaign, lowering the price of thousands on products across our stores and online to help customers save week in week out on the products they buy the most.”

Despite the data revealing a reversal in the spending power growth pattern of recent months, Asda’s pulse of the nation insight shows that consumers are still feeling pessimistic about the economy.

The latest insight shows that only 6% of the customers asked felt their spending power would increase over the next month, whilst over 50% believed it would fall.

This month, the cost of essential items increased by 2.2% for families across the UK, down slightly from the 2.3% reported in May. One of the main contributors was the continued increase in electricity prices for households, which inflated the most out of any essential item year-on-year.

Over two thirds of customers feel that the cost of electricity bills at home will increase over the next month, whereas a mere 3% believe they will see a reduction in their monthly bill. 76% of those questioned think their cost of living will continue to rise going into August.

Looking at the contribution to the headline inflation rate, the cost of transport continues to have the largest impact on inflation in July. Costs for transportation are up 3% on the same month last year and this increase continues to impact families spending power as the cost of living increases.

However in July, fuel prices steadied compared to the double digit growth in the first half of the year, as consumers see just a 2% price increase at the pumps.

Kay Neufeld, Senior Economist, Cebr, said: “After three months of falls in the Asda Income Tracker, the latest data provides welcome relief for households across the UK. Inflation remained unchanged in July as falling fuel prices offset some of the cost increases seen in other categories.

“However, it would be too soon to announce the end of the squeeze on households. Fast rising prices for food, clothing and electricity put family budgets under pressure – this is especially true for older households who dedicate a larger share of their expenses to essential spending and utilities."

ENDS