Stability returning to family budgets, says supermarket

Family spending was flat in October 2013 as a steep decline in essential item inflation offset weak income growth.

According to figures released today by the Leeds-based supermarket, 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 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 per cent,
the lowest rate since February 2010.

The cost of mortgage interest payments was down by 0.6 per cent compared to a year ago while the price of fuel also fell 4.2 per cent 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 one per cent cap on the uprating of most working age benefits. Average regular pay was up just 0.8 per cent in the three months to September compared with the same three months last year.

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

Andy Clarke, Asda president and chief executive, said: “The fall in essential item inflation and some much needed stability in disposable income will bring a welcome respite for customers.”

The research was carried out by the Centre for Economic and Business Research.