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Household disposable income up, but families remain cautious

Published 28/01/2016

Families acted cautiously over parting with their extra cash
Families acted cautiously over parting with their extra cash

Families were £13 better off in December than a year ago - but acted cautiously over parting with their extra cash, a report has found.

The average UK household had a weekly disposable income of £194 last month, up 7.2% on December 2014, according to the Asda's latest Income Tracker compiled by the Centre for Economics and Business Research (Cebr).

However, the annual growth figure was the lowest percentage increase in 14 months due to a weakening in wage growth and a slight increase in inflation.

While the rise in disposable income slowed, all but two areas - the North East and Northern Ireland - enjoyed double-digit increases.

London households' discretionary income reached £259, up 5.8% year on year, while Northern Ireland experienced the strongest year-on-year growth of 10.5%, boosted by a sharp fall in the price of some essentials and a rise in employment over the past 12 months.

Figures for Scotland were less positive, where slowing wage increases reduced the rate of disposable income growth to 5.6% or 1.6% lower than the national average, the report said.

Shoppers were able to make the most of a 0.2% fall in food prices between November and December, while fuel prices fell by 11.4% year on year.

However, the report said airfares increased by 46% between November and December - the largest December price hike seen since 2002.

Asda president and chief executive Andy Clarke said: "Despite these positive economic indicators, spending patterns remain erratic.

"Although falling vehicle fuel costs are putting extra pounds in consumers' pockets, this doesn't necessarily translate to an increase in household spending."

Cebr economist Sam Alderson said: "Against a backdrop of global economic turbulence, households across the UK continued to see spending power head higher, supported by another month of negative essential item inflation.

"Global growth concerns have already sent oil prices lower and are likely to hold interest rates lower for longer.

"While this should help provide further boosts to spending power in 2016, the uncertainty means that families can be forgiven for exercising some caution in terms of spending any additional spare cash."

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