- September spending growth dropped to under £10 per week – the first time since October 2014
- Families across the UK had £201 of discretionary income per week in September – a rise of 4.7% compared to 2015
- Wage growth remained flat as pace of inflation continued to rise
- Discretionary income in Scotland reached £204 per week, overtaking the UK average
LEEDS, England, 2016-Oct-29 — /EPR Retail News/ — The latest figures from Asda’s Income Tracker reveal that annual spending growth dropped to under £10 for the first time in almost two years during September.
UK families had £201 of discretionary income last month, £9 (4.7%) more than the same period last year, however these figures mark the first time in 22 months that consumers have not seen double digit growth in discretionary income.
Contributing to this decline was the increase in essential item inflation which rose 0.4% in September – the largest increase since November 2014 – driven mainly by a rise in essentials such as clothing and footwear, and housing and utility bill costs. Due to the weakening pound, the price for vehicle fuel also rose 1.4%.
With the value of sterling expected to remain weak, rising prices for imported goods will contribute to a higher rate of inflation over the coming months.
An increase in restaurant and hotel prices, the cost of communications such as broadband and mobile bills, and alcohol and tobacco costs also contributed to the slowdown in spending power growth.
In contrast, food and non-alcoholic drinks bucked the trend in September, as prices fell on average by 2.3% year on year – a 0.1% decrease on prices seen in August.
In line with trends seen throughout the year, wage growth and unemployment remained flat over the last month, with wage growth staying slightly ahead of inflation. However, if inflation continues to rise at the same rate as predicted, it could eclipse wage growth and leave consumers with less income in their pockets by the middle of 2017.
Looking across the regions, the last quarter has provided good news for Scottish families, with Scotland overtaking the UK average as households boast an average disposable income of £204 per week.
There was also a more positive outlook for the North East, which experienced the fastest growth in gross income out of all the regions courtesy of a 3.2% increase over the last quarter. In previous months the North East had been lagging behind the UK average, however the latest data signals that the region is catching up.
While increases in discretionary income were smaller than those seen in previous quarters, both Wales and Northern Ireland posted high annual growth rates for the third quarter, up £14 and £8 respectively.
Meanwhile, the South West and North West both saw growth rates for gross income decline between the second and the third quarter of this year– a trend caused in part by an increase in unemployment.
An Asda spokesperson said: “As a retailer, it’s encouraging to see that UK families were able to benefit from a decline in food prices during September, especially as inflation and a weakened pound raised the cost of other essentials items.
“Consumers are still £9 better off than the same period last year, however the drop into single digit spending power growth for the first time in almost two years will cause some concerns for consumers, so we will be watching the trends carefully over the coming months.”
Kay Neufeld, Economist, Cebr, said: “Household incomes continue to increase, but rising inflation is starting to take its toll on spending power. The weak pound means that price growth is going to accelerate further in the next months, increasing the cost of the weekly shopping.
“In September, for the first time in nearly two years, households’ weekly spending power has risen by less than £10. After a long period of unusually low inflation, we can expect to see price increases for many essential items over the next months. For 2017, decreases in spending power cannot be ruled out.”
Source: ASDA