Asda's Income Tracker reveals nation's spending power continues to slow but outlook for 2016 remains cautiously optimistic
- The average UK household had a weekly disposable income of £197 in January, up £12 on January 2015
- Annual growth in spending power fell for the fourth consecutive month – due to a slow down in wage growth and a continued increase in inflation
- Still, as household incomes continue to increase faster than the cost of essential items, outlook for UK family spending power remains positive
Families across the UK enjoyed another double-digit increase in spending power in the first month ofthe year, according to Asda’s latest Income Tracker. As employment across the UK continued to rise, the average UK household discretionary income reached £197 a week in January 2016, up £12 (6.7%year-on-year) compared to the same time last year.
However, the latest findings also revealed that, while bank accounts continue to receive a boost, January marked the fourth consecutive month where the year-on-year rate of spending power growth has fallen, thanks to a slowdown in wage growth and a steady increase in inflation. While the economic outlook remains relatively positive, Asda’s latest Income Tracker suggests that a slow ingrate of recovery is having a knock on effect on British purse strings, with disposable income set to continue to grow at a slower rate than those seen through much of 2015.
Things are looking up for job seekers across the UK, with employment figures of 74.1% being at their highest rate since before the financial crash. Yet, wage growth continues to slow, with average weekly earnings rising by just 2.0% year-on-year.
Inflation is also impacting on purse strings. Despite deflation shaping the cost of many household goods, and outgoings including petrol down, overall inflation has grown for a third month in a row – now at its highest since January 2015, reaching 0.3%. What’s more, this trend is predicted to continue in 2016, though the overall rate of inflation is expected to remain relatively low with falls in oil prices and other commodities set to continue and a competitive retail environment likely to place downward pressure on prices.
Still, it’s a positive picture for families across the UK, with average household income continuing to grow considerably faster than the cost of essential items. In the first month of 2016, the year-on-year price growth for essential items remained steady at -0.1%, with prices falling between December and January on items including food, drink and fuel, as well as clothing a footwear thanks to the early New Year sales. All welcome relief for families as they look to spend more on activities together, such as eating out, in 2016.
Some transport costs have also had a surprisingly positive impact on pockets. Those looking to escape to warmer climates and make the most of cheaper overseas travel in January, were in luck with a considerable fall in transport costs. In contrast to December 2015 when travellers faced a sharp pricehike (46%) in airfares over the festive period, last month fares dropped significantly compared to the same period last year. Prices were 2% cheaper year-on-year, helping to provide a healthy boost to holiday spending money to combat the January blues.
Andy Clarke, Asda President and CEO said: “Another double-digit increase in disposable income in January gave a welcome financial boost at a tough time of year. In juxtaposition, annual growth in spending power fell year-on-year for the fourth consecutive month.
“The good news is that the outlook for 2016 is positive for UK households, with incomes increasing and employment buoyant. Whether families choose to save their extra income or boost spending on leisure, treats or everyday essentials remains to be seen. The good news for consumers is that the competitive retail environment is translating to lower prices across the board.”
Sam Alderson, Economist, Cebr, said: “Although growth in family spending power has declined in the latest data, the overall picture is positive. UK consumers have much more money to spend than a year ago.
“We expect continued falls in unemployment as well as rising earnings growth over the coming months. Combined with sustained low inflation, households should be in for a good time in 2016 as far as their finances are concerned. This comes despite broader concerns over the strength of the UK economy.”