Belfast Telegraph

Sunday 13 July 2014

Spending power continues to weaken

A survey revealed families are on average 10 pounds a week worse off than a year ago

Family spending power has slumped to its lowest level since 2008, amid tough employment conditions and the high cost of essential goods, a study has warned.

UK households had £144 a week of discretionary income in March on average, making them £10 a week worse off than a year ago and giving them the lowest amount of disposable income since November 2008, according to the Asda Income Tracker.

The report said spending power is being "squeezed in both directions": by slow wage growth and unemployment which is keeping families' incomes "fragile" and by the impact of high inflation pushing up the cost of basic goods.

There were strong regional variations in how much cash people have left over to spend, showing the different pressures people face. Discretionary income in London was £266 a week on average in the first quarter of this year, compared with just £83 a week in Northern Ireland, the report found.

Researchers said that families in Northern Ireland were particularly exposed to recent price increases as they tend to spend a high share of their income on essential items. They are also particularly reliant on public sector employment, meaning the outlook for workers remains tough.

The cost of utilities and transport remain two of the major factors putting pressure on households generally, despite recent bill cuts made by energy providers, the report said. Over the year, gas and electricity prices rose by 8.1% and 16.1% respectively, while petrol and diesel went up by 4.2% and 4.7%.

The year-on-year decline in spending power is the biggest drop since December 2011 and follows a recent trend of improvements. The report said that while inflation is likely to fall back this year, the cost of basic goods is set to continue outpacing wage increases, keeping the pressure up.

Charles Davis, managing economist at the Centre for Economics and Business Research which compiles the report, said: "Family budgets in 2012 are continuing to be squeezed by the three pressures of high unemployment, very weak wage increases and stubbornly elevated inflation.

"While growth in the price of essentials is likely to fall back slowly this year, the current tough conditions in the UK labour market look set to prevail.

"Average earnings growth is expected to trail inflation over 2012, keeping pressure on household incomes. As such we are likely to see continuing declines on the Asda Income Tracker over the coming months, although at a slower pace than during 2011."

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