UK families were £12 a week better off a week in June compared to last year, as low interest rates and the resulting lower mortgage payments left people with more free cash, according to Asda’s income tracker.
The average UK household had £164 a week of discretionary income in June, a rise of 7.8% on the previous year, when spending power was dented by rapidly rising prices.
“…although the increase in spending power is welcome, most people will probably end up saving it or using it to pay off debt.”
Andy Bond, chief executive, Asda
However, Asda said that the increase in spending power was unlikely to be translated to high street spending, as many people would save spare cash or use it to pay off debt.
Asda president and chief executive Andy Bond said: “Despite households being £12 a week better off, and although the pace of job losses has slowed, unemployment is likely to continue rising in the coming months, affecting consumer confidence. Many families still face reduced household wealth and high debt levels, so although the increase in spending power is welcome, most people will probably end up saving it or using it to pay off debt.”
Charles Davis, an economist at Cebr, which compiles the monthly report for Asda, said: “This month’s year on year comparison is exaggerated somewhat by base effects from June 2008 when prices were rocketing. But nevertheless the Asda income tracker shows how interest rate cuts are helping households. However, labour market weakness and household balance sheet rebuilding continue to provide reasons for caution on the outlook for consumer spending.”