Consumer spending power picks up pace on lead up to Christmas
- Spending power has increased for over 80% of UK households
- Over the month of October weekly spending power was £6.56 higher compared with the same month a year ago - a 3.3% year-on-year increase
- Second consecutive month of growth above 3% - as wages rise at the fastest rate since 2008
- Inflation remains steady as prices for clothing and footwear continue to fall
The Asda income tracker is a measure of ‘discretionary income’, reflecting the amount of money remaining after the average UK household has had taxes subtracted from their income and bought essential items such as: groceries, electricity, gas, transport costs and mortgage interest payments or rent.
The full report can be found here:
Year on year change
During October 2018, average weekly spending power of UK households rose by £6.56 compared with the same month last year – equivalent to a 3.3% increase. The UK’s average discretionary income sits at £206 a week in October 2018, up from £199 in October. 2017.
Figures released by Asda show that this, coupled with continued wage growth brought some relief to UK households as the countdown to Christmas begins. Inflation stood at 2.4% in October, unchanged from the previous month.
Regular pay (excluding bonuses) increased by 3.2% on the year, the fastest since Q4 2008 as the tight labour market forces employers to offer better pay to attract and retain staff.
Price increases slowed in most categories suggesting that consumers can enjoy the higher wage growth without having to pay more for their essential items. Clothing and footwear in particular became more affordable with prices decreasing for a second consecutive month in October.
Inflation in the transport category also slowed again on the back of cheaper prices for new vehicles and transport tickets.
This was partially offset by highers prices for petrol. Fuel prices inflation rose to 11.9% in October, the highest value since July.
In response, Asda have announced two price drops in fuel in successive weeks, cutting the price of petrol by 5ppl.
Also given the recent fall in global oil prices, it is expected consumers will benefit from somewhat cheaper prices at the pump over the coming months.
UK split by income quintiles
Overall, spending power has increased for 80% of UK households, with only households in the lowest income quintile seeing futher declines in spending power. Households in the second income quintile recorded an increase in the income tracker after 21 months of consecutive declines, with discretionary income for the group standing at £32 per week.
The third income quintile group has also been recording growth over the past eight months, with weekly family spending power up to £90 a week, the highest its been since Deceber 2016.
Low income households however, have not seen an increase in family spending power since June 2016.
Kay Neufeld, Manbaging Economist, Cebr, said:
“UK households continue to benefit from the combination of steady inflation and accelerating wage growth. While gains in the ASDA Income Tracker were still modest at the beginning of the year, we have now seen the second consecutive month with growth of more than 3%, making a real difference in households’ budgets.
“Low unemployment and record-high employment rates keep up the pressure on wage growth. At the same time, inflationary trends subside across most categories, with a recent fall in global oil prices likely to bring more joy for motorists.
“Looking ahead, we expect family spending power growth to pick up up pace at the time of year we need it most with the busy festive season approaching.”