SHOPPERS have more money in their pocket than at any time in the last seven years, thanks to a combination of plunging air fares and a hefty drop in the price of food and drink, according to Asda’s latest monthly Income Tracker.
Consumers had an extra £17 a week in their pockets in April this year, meaning that families across the UK now have £187 a week to spend on the things they want, rather than the items they need, which is over 10 per cent higher than this time last year.
The £187 extra a week is the highest level of discretionary spending since Asda started its Income Tracker in 2008. In February the figure hit £184 a week and rose to £185 per week in March.
The indications are that this level is likely to rise in the coming months as food prices continue to fall, employment rises and people become more confident that they can afford to spend rather than save for a rainy day.
Asda’s latest Income Tracker revealed that airfares were 5.3 per cent lower in April than they were a year ago while the typical basket of food and non-alcoholic drink was 2.8 per cent cheaper.
Home electricity, gas and fuel also saw a 2.8 per cent price reduction while 386,000 more people were in employment than a year ago
Asda said that holidaymakers can afford to splash the cash, with lower air fares and a strong pound providing a strong incentive to travel.
Its data showed that holidaymakers who are travelling to the Continent this year are almost €50 (£35) better off than this time last year.
The Leeds-based supermarket said falling prices of essentials such as food, gas and electricity have been key factors in the sharp fall in inflation seen since the middle of 2014.
The UK has now fallen into deflation for the first time in 55 years.
President and CEO of Asda, Andy Clarke, said: “During my 30 years in retail this is the first time I’ve seen essential item deflation and I know this will be welcomed by those stocking up their cupboards.
“What I’m seeing in my stores is a customer who’s better off financially than twelve months ago, but one who is still battle scarred and choosing to save rather than spend on those extra treats”.
Sam Alderson, economist at Cebr which provides the data, said: “With inflation turning negative in April, concerns have once again been raised about the effect of deflation on the UK economy.
“However, negative inflation is largely expected to be temporary.
“As such, the significant increases seen in household spending power should provide the economy with a major boost in 2015. In that sense deflation has helped rather than hindered the UK’s economic recovery.”
Household spending power has been growing at some of the strongest rates seen in a generation.
On top of falling unemployment, families are benefiting from a continued pick-up in wage growth and a further increase in the income tax free personal allowance, which rose by £600 at the start of April.