Families £15 better off than a year ago thanks to falling fuel prices and cheaper utility bills
- Families' discretionary spending in December was £180 a week, according to latest Asda Income Tracker report
- This is up from £179 in November and £165 in December 2013
- Essential item inflation plummeted to just 0.2% last month
Falling fuel prices and cheaper utility bills put an extra £15 a week in families’ pockets to spend on extras last month compared to a year earlier, a new report has shown.
December’s increase in discretionary spending, which excludes bills, taxes and essential items like food and transport, was the biggest since November 2009, according to the latest Asda Income Tracker.
British families had £180 a week to spend on non-essential items such as holidays, cinema, theatre, eating out, toys and games at the end of last year, compared to £179 in November and £165 in December 2013.
Fall in essential items inflation: The price of fuel has plummeted and energy suppliers have begun cutting bills
On a yearly basis, average spending power has grown for fifteen months in a row, with the pace of growth accelerating in the second half of the year, Asda said.
Essential item inflation plummeted to just 0.2 per cent last month as the price of motor fuels fell further. The average litre of unleaded petrol dropped to 6.6p in December, the third biggest monthly fall in the past 25 years according to the AA.
Motorists filling up last month were paying 116.3p per litre for petrol and 122.2 per litre for diesel – down 10.5 per cent from the same time last year.
Fuel costs have been falling on the back of sharp drops in oil prices, with Brent Crude currently at $48 a barrel, down from $115 in June.
Some energy suppliers have also cut the prices of gas and electricity in January after falls in the wholesale price of energy, while others have announced cuts for the following months.
SSE is set to reduce its customers' gas bills by 4.1 per cent from April. Eon's 3.5 per cent price drop starts on January 13, while Npower, Scottish Power and British Gas will cut prices throughout February. Only EDF has yet to announce a drop in its prices.
Income Tracker: Discretionary spending in December increased at the fastest pace since November 2009
This, alongside with further falls in the price of fuel at the pumps, could see both consumer price inflation and essential item inflation turn negative in the coming months.
Sam Alderson, economist at Cebr, which compiled the report fro Asda, said households were currently experiencing a ‘considerable boost’ to their finances from the combined effects of record low inflation, rising employment and wage growth at its fastest since the financial crisis.
‘It’s encouraging to see the economic tide finally turn in the favour of UK households, after a long and difficult period since the 2008-09 recession.’
UK consumer price inflation dropped from 1 per cent in November to 0.5 per cent in December. And the latest official figures showed that unemployment fell to its lowest level for six years, a rate of 5.8 per cent, in the three months to November.
Families' finances: Average spending power has risen year-on-year for fifteen consecutive months
However, the rate of job growth was at its lowest level since May 2013, and wages - which are still well below their pre-financial crisis levels in real terms - saw yearly growth edge back to 1.8 per cent in November after climbing to 2 per cent in October.
The Asda data follows yesterday's Lloyds Bank Consumer Confidence index, which suggested that extra expenses over Christmas dampened consumer confidence last month.
Families were less positive about the country’s and their own current financial situation in December – although confidence remained higher than it was at the beginning of the year.
But Lloyds pointed out that families were set to feel more positive as essential spending continued to fall thanks to cheaper petrol and food.
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