Cheaper food and fuel boost British households' spending on luxuries

Cheaper petrol and food left households with more money to spend on new cars, furniture and going out this year.

A new report into disposable incomes highlights how lower spending on essentials in 2015 meant Britons were able to buy more luxury items like jewellery and watches as well as spending more on their homes and gardens.

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But the latest Asda income tracker also suggested the rapid improvement in household budgets for much of this year started to level off in November. The average UK household had £193 a week of discretionary income in November, up by £14 a week on a year earlier, according to the monthly report into money leftover after taxes and the cost of essentials like groceries, transport and fuel bills.

It was the 13th straight month of double-digit growth in disposable incomes but the £14 extra spending boost fell short of the £17 average seen during the rest of 2015, thanks to a slight increase in inflation. The figures follow signs that households are starting to feel the effects of a flattening off in pay growth.

Incomes improve, but at a slower pace

November’s Asda income tracker showed average household discretionary incomes excluding bonuses were 7.7% higher than the same month in 2014 – the lowest rate of annual spending power growth since November 2014. Illustration: Asda Income Tracker/CEBR

Analysing the first three quarters of 2015, the report authors found that with food, vehicle fuel and energy costs all down on a year earlier, and wages finally rising in real terms, people were ready to spend on bigger items.

Spending on cars rose 11.5% compared with the first three quarters of 2014, spending on jewellery and watches rose 9.1% and spending on furniture was up 6.6%. There was also an 8.7% rise in spending on gardens, plants and flowers and a 2.1% rise in money spent on dining out.

Less on essentials, more on leisure

Figures from the first nine months of 2015 showed a strong rise in spending on recreation. Illustration: Asda Income Tracker/CEBR

“The good news for customers is that pressure on household budgets has clearly eased in the run-up to Christmas as a direct consequence of decreases in the cost of food, fuel and energy prices,” said Asda’s chief executive, Andy Clarke.

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