The “national living wage” and falling cost of food and transport have improved UK household finances, according to a report.
Asda’s monthly income tracker shows that the average UK household had £201 a week of discretionary income in May. This was £13 (7.2%) more than in May 2015 and the highest amount since the supermarket started collecting income data in 2008.
The improvement in household budgets follows the introduction in April of the wage, a higher minimum pay threshold of £7.20 an hour for those aged 25 and over.
Family finances were also helped by a decline in the cost of some essential items. Food and drink prices fell by 0.4% on the month in May and were down by 2.8% on the year. Transport costs were also lower than a year ago, according to the report compiled for Asda by the Centre for Economics and Business Research.
The improvement in spending power will boost hopes that consumers can continue to drive economic growth in the UK. But experts have warned that the economy remains unbalanced, with manufacturing and exports lagging behind the recovery in consumer spending.
Asda noted that the EU referendum on Thursday was clouding the outlook for household spending. A spokesperson said: “While costs continue to fall for UK households and spending power growth begins to accelerate once more, the long-term picture is more difficult to predict as we wait to see the impact of the EU referendum’s decision on the nation’s pockets.”
Surveys published before the referendum have showed only a modest effect on consumer confidence. The latest official figures on retail sales revealed that shoppers appear to have shrugged off worries about a vote to leave and any possible impact on the economy, with a strong rise in sales volumes last month.
By contrast, polls of business sentiment suggest that chief executives are more cautious. The Bank of England has noted that many investment decisions are being deferred until after the referendum.
