Power bill rises sap confidence of consumers

Consumer confidence slowed down in June as high gas and electricity prices hit household incomes, according to two influential reports out today.

Andy Clarke, Asda's chief operating officer
Andy Clarke, Asda's chief operating officer

The latest Asda Income Tracker said household utility prices for gas, fuel and electricity remained well up on a year ago which has hit discretionary income.

The Lloyds Bank Spending Power Report for June showed the first dip in confidence so far this year with a 2.5 per cent fall in gas and electricity spending as customers try to cope with ever rising bills.

The reports come amid calls from consumer watchdogs for utility firms to reduce prices as households struggle to pay their bills.

Asda said the average UK household had £171 a week of discretionary income in June 2014, up £1 a week on June 2013.

This was the ninth consecutive rise, but it was at a slower rate than previous months

Asda reported a mixed picture across the regions as the East and West Midlands bucked the trend with discretionary incomes rising by £6 and £7 respectively while incomes in the South West fell by £1.

In Yorkshire and the Humber, incomes rose by £2 a week, beating the national average.

London was no longer the engine of growth it once was as incomes rose by a modest £1 in line with the national average. Asda said this was because of its dependence on the finance and business services sector, which continue to see year-on-year declines in average pay.

As with the capital, Scotland’s reliance on the banking and business services sector meant family spending power in the region was on hold.

Asda said the boost in discretionary incomes will come as welcome news for families who benefited from the positive year on year effects of a three per cent fall in the cost of filling up their cars, food prices remaining flat and a 0.3 per cent decrease in their mortgage interest payments.

The lowest level of unemployment since 2008 and April’s increase in personal tax allowance have also helped to keep the tracker in positive territory.

The Leeds-based grocer said that while families were better off again last month, their discretionary incomes were prevented from rising further by three main factors – household utility prices (gas, fuel and electricity) remaining well up on a year ago, an increase in the rate of essential item inflation to 1.6 per cent and slow wage growth.

This increase in inflation was partly down to clothing retailers postponing their summer sales, which typically happen in June.

President and CEO of Asda, Andy Clarke, said: “This month’s income tracker is a tale of two halves. Whilst we are seeing the ninth consecutive month of growth – this growth is slowing. And over the past month families have not felt the same level of benefit in their household budgets that the positive headlines about economic recovery that we’ve seen in recent weeks would suggest.

“Whilst some regions continue to step on in their economic recovery, others have actually seen a step back this quarter indicating that recovery still remains a postcode lottery.

“Although I know that for shoppers a pound a week extra in their pockets will still make a difference, equally, we must recognise that, as a week of sunshine doesn’t make a summer, there will need to be greater, prolonged consistency in our economic indicators before we can claim a full recovery.”

Rob Harbron, senior economist at the Centre for Economics and Business Research (Cebr), said: “Households around much of the UK are facing the twin squeezes of very weak wage growth and rising inflation.”

The Lloyds Bank Spending Power Report for June showed consumer confidence easing a percentage point to 145 points.

However, overall spending growth on essentials remains relatively stable, limiting the pressure on consumer wallets.

Lloyds said the pace of decline on petrol spending has levelled out to around 5.5 per cent lower than a year ago.

Various sporting events last month may have helped drive a rise in food and drink spend from around 1.5 per cent to around 2.5 per cent in June.