Most households in the UK are struggling with affordability and have less disposable income to spend, even on essentials including bills.
More than a third of British consumers, in fact, are falling short of remaining level with their pay and debt, according to the newest Income Tracker report from supermarket Asda.
The message: retailers should maintain low price points if possible and let consumers know in multiple channels about sales. Asda is one of those that have installed multiple measures, including Aldi price match schemes and continuation of meal deals, to try to offset the binds that inflation has put on family purse strings. It recently locked in 500 prices on both branded and own-label items.
While families in the UK earn an average just under £950 per week, what they spend on essential items and taxes comprises about 80%, or £739. So their buying power is effectively a little less than £207 right now, the lowest figure since October 2022.
“Despite the relatively strong wage growth environment, spending power is falling for the vast majority of households,” the report notes. “The bottom four income quintiles are still witnessing annual falls in spending power. The fall has been particularly stark for those in the second quintile, with such households having seen their discretionary incomes fall from positive to negative territory over the course of the cost-of-living crisis.”
If there is some good news, Asda’s researchers predict that a confluence of factors including dips in inflation will help families the rest of the year. However, they further cautioned that the stability might only aid certain families.
High-income earners, for example, have been relatively insulated from outcomes that have scorched those making lower wages. While low-tier earners saw a decrease of £42.50 per week last month, the big-time earners saw gains of more than 2% in disposable income since last year. Their average disposable income is more three-times that of the average worker at £754 per week.
Where has inflation hit the hardest? It is in food and non-alcoholic drink as prices have jumped more than 18% year over year. That has even outpaced housing (+12.1%), something to keep in mind as shoppers look for bargains.