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Discretionary income flat year-on-year says Asda Income Tracker

According to the latest figures, released today (Monday 18th November), the average UK family had £158 of discretionary income available to them in October 2013, unchanged from last year – halting a three month period of year-on-year decline.

- The average UK household had £158 a week of discretionary income in October 2013 – the first time since June that discretionary income has not fallen year-on-year
- A sharp decline in annual essential item inflation between September and October provided welcome respite to UK households – down 0.7 percentage points, to 2.1%
- Good news for motorists in particular as the cost of fuel fell 4.2% year-on-year- driven by the largest decline in the price of petrol since November 2008
- However, weak net income growth continues to curtail the benefits of falling inflation – slowing to a year-on-year rate 1.9%, the lowest growth since March 2012
- The rising cost of energy is also a factor constraining spending power, with the price of gas and electricity up 8.3% and 8.6% respectively over the 12 months to October.
- The latest Asda Income Tracker has revealed that family spending was flat in October 2013, as a steep decline in essential item inflation offset weak income growth.

The sharp fall in annual essential item inflation was the leading factor behind this improvement in family finances – down 0.7 percentage points to 2.1%, the lowest rate since February 2010.

The cost of mortgage interest payments, for instance, was down by 0.6% compared to a year ago while the price of fuel also fell 4.2% thanks to the largest decline in petrol prices since November 2008.

Despite this, families are yet to feel the benefits of falling inflation because of slow pay growth and the 1% cap on the uprating of most working age benefits. Average regular pay was up just 0.8% in the three months to September compared with the same three months last year. This was almost a third of the rate of essential item inflation (2.1%) and the lowest rise on record since the Office for National Statistics began collecting comparable figures in 2001.

Year-on-year increases in the cost of gas and electicity also continued to squeeze household budgets last month, up 8.3% and 8.6% respectively, suggesting that energy will continue to remain a constant source of pressure as we enter the winter months.

Asda president and CEO Andy Clarke said:

“The fall in essential item inflation and some much needed stability in disposable income will bring a welcome respite for customers.

“We should welcome positive signs of improvement in the macro economy, but it’s clear that it will be a challenging Christmas. We know it will take time for any macro improvements to filter down into a real sense of relief for families, especially in regions hardest hit by the economic downturn.

“As petrol prices have fallen back and mortgage costs have declined, there is a glimmer of hope that we’re on the right track for 2014. But without a substantial improvement in income growth the journey to recovery will be slow.”

Rob Harbron, Senior Economist, Cebr, said:

“The latest Asda Income Tracker provides welcome signs that the squeeze on household spending power is starting to ease. Falling inflation amid declining petrol and mortgage costs has helped protect household finances.

“Nevertheless, we still seem some way from significant increases in household spending power – income growth remains very weak by historical standards and further utility price rises will hold back discretionary incomes”.

Source : Asda

18 November 2013
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