Disposable income for the average UK household fell in May as wages failed to keep up with inflation.
The data, from the supermarket Asda’s Income Tracker, shows that last month the average UK household had £157 per week of disposable income - the cash that remains after essentials such as taxes, bills, food, housing and transport costs - down £1 on a year ago.
Asda’s research suggests that, despite an increase in the personal tax allowance from £8,105 to £9,440, the rising cost of energy bills, goods and services means that families don’t feel much better off. Asda’s chief executive Andy Clarke said: “The fluctuation of disposable income levels throughout 2013 further demonstrates the fragility of spare cash available to families, which is crucial to stimulating economic growth.”
Consumer prices index (CPI) inflation reached 2.7% in May, up from 2.4% in April, according to the Office for National Statistics (ONS). This increase was partly driven by rising air fares and more expensive clothing and footwear. The increase was higher than expected; well over the Bank of England target of 2% - a figure which hasn’t been hit since late 2009.
The ONS reports that average earnings increased by just 1.3% in the year to April, increasing the impact of inflation on household budgets. Rob Harbron, economist at the Centre for Economics and Business Research said: “Although reduced motor fuel costs, higher tax free personal allowances and solid job creation in the private sector have helped support household finances, the weakness of earnings growth, capped benefits growth and above-target inflation remain ongoing pressures.”
High inflation can also cause problems for those in retirement. MGM Advantage, the retirement income specialist, has estimated that each UK household will typically need to spend an extra £678 per year to maintain their standard of living from one year ago. Aston Goodey from MGM Advantage said: “Households on low or fixed incomes, including people who rely on pensions to fund the cost of living, will continue to feel the financial pain of inflation through the everyday cost of living.”