Families £12 a week better off Tue, 21st July 2009 Families £12 a week better offTuesday July 21st 2009
 The average UK family is £12 a week better off compared to June 2008 as the effect of Bank of England interest rate cuts continue to help mortgage payers. As a result the average household had £164 a week of discretionary income in June 2009, 7.8 per cent higher than a year earlier - when spending power was being hit by rapidly rising prices. Food and drink inflation is the lowest it has been since November 2007, while inflation on utilities is the lowest since April 2008. Transport costs are down year on year but have risen in each of the last five months. According to the latest ASDA Income Tracker report gross income rose by £10 a week in June 2009 compared with a year earlier. After tax, average family incomes rose by £7 a week in June 2009 relative to a year earlier. However, inflation fell to its lowest level in 21 months on the consumer price index and there was a record year on year drop in prices on the retail price index. Andy Bond, ASDA president and CEO welcomed the increase in household income but warned people may be reluctant to spend it. He 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. That's why it is essential that retailers like ASDA continue to fight inflation and focus on lowering prices to help stimulate consumer demand, and restore confidence as quickly as possible." Charles Davis, an economist at Cebr who compiles the report for ASDA, said: "In June the ASDA income tracker showed the largest year on year rise since the income tracker began due to the Bank of England's interest rate cuts over the last year and the lowest rate of consumer price inflation since September 2007. "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." Reduced mortgage interest payments combined with month on month reductions in the price of food, alcohol and clothing all helped to reduce the cost of items in the essential spending basket by 2.7 per cent year on year in June 2009. Overall essential spending was £5 a week lower in June 2009 compared with a year earlier. Therefore, spending power for discretionary items was £12 a week higher in June 2009 relative to June 2008. Consumer price inflation is set to fall further towards - and quite possibly below - the 1.0 per cent mark, hence, the ASDA spending power indicator is likely to continue to rise in coming months. Although the pace of job losses has slowed, unemployment is likely to continue growing in the coming months and many households face reduced wealth levels and high debt. Therefore, increased spending power may actually end up as increased saving or debt repayment. In the first quarter of 2009 households injected £8.1 billion into housing equity: a record net injection. This compares with an average quarterly housing equity withdrawal of £11.5 billion over the period from 2002 to 2007 (N.B. The savings ratio in 2008 was at its lowest level since 1959).
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