Family spending power fell in January, reveals Asda | Industry News | TalkingRetail.com

Family spending power fell by£9 per week in January 2011, the largest fall on record and the second record breaking month in a row, according to the latest Asda Income Tracker.

The average family had£174 per week to spend in January, 4.7% down from £183 this time last year. When the impact of bonus payments is included, family spending power also decreased by £9 over the year to January, a fall of 4.3%.

The continued decline in family spending power in 2010 and into 2011 was the result of the price of essential goods and services rising faster than net income growth. Gross incomes grew by 2.4% in January 2011 year-on-year, down from 2.6% in December but above the lows experienced in 2009.

The rise in inflation points towards the depreciation of sterling, rising global commodity prices and the VAT rise in January 2011. With ongoing disruption to oil supplies through Egypt and vibrant demand from emerging economies, the price of crude oil put pressures on petrol costs in January. In addition, VAT rose to 20% on 4 January, and earnings growth has remained sluggish. As a result, those factors which caused the Asda Income Tracker to fall in 2010 have persisted into 2011 and are likely to continue over the short term.

Charles Davis, managing economist of Cebr, said:“With annual consumer price index inflation double the Bank of England’s target rate, while earnings growth remains modest, average households are seeing spending power sharply eroded.

“This trend is likely to continue into 2011, as inflation remains elevated and the labour market recovery lacks conviction.”

Andy Clarke, Asda president and CEO,said:“The latest drop in household spending power reflects what we’re seeing in our stores – customers making each pound count.

“We’re conscious that we’re now seeing year-on-year declines in disposable income that reinforce our responsibilities to shoppers – holding back inflation, keeping prices low, and being at our best in helping them deal with whatever the economy throws at them.”

Source: Asda

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