HOUSEHOLD spending power fell further in May as wages struggled to keep up with rising prices, according to a report.
The average UK household had £157 per week of discretionary income in May, down £1 or 0.5% on a year earlier, supermarket Asda’s Income Tracker showed.
That remains below the £165 peak seen in early 2010, as higher gas, electricity and water bills heap further pressure on cash-strapped consumers.
And disposable income fell despite an increase in the personal tax allowance – the part of earnings on which no tax is paid – to £9,440 in the current tax year from £8,105 a year earlier.
Asda chief executive Andy Clarke said: “Last month the increase in personal tax allowance relieved the pressure on family budgets, as green shoots in the economy started to emerge.
“However, the reality of three years of near continuous decline in disposable income means families don’t feel any better off.
“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.”
Figures recently showed the squeeze on consumers intensified last month as soaring air fares and more expensive clothing and footwear lifted inflation higher than expected.
Consumer Prices Index (CPI) inflation climbed to 2.7% in May, from 2.4% in April, the Office for National Statistics (ONS) said.
That leaves inflation stubbornly above the Bank of England’s 2% target, which it has not hit since late 2009.
But while inflation is expected to peak at about 3% in coming months, economists believe it will then begin a “slow but steady” drift down.
Inflation continues to outstrip wage rises, with average earnings increasing by just 1.3% in the year to April and 0.7% on the previous month, the ONS said recently.
Rob Harbron, economist at the Centre for Economics and Business Research, said: “Household incomes are struggling to keep pace with the rising price of essentials, leaving discretionary spending power £8 per week lower than its peak seen in 2010.
“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.”
Asda’s measure of disposable income is based on what remains after accounting for essentials such as taxes, food, bills, transport, clothing and housing costs.
However, disposable income has risen from a low of £151 in late 2011, the supermarket said.