Brexit not deterring shoppers but household finances under pressure

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The outcome of June’s referendum to leave the EU and the weakened pound has not yet had an impact on shopping behaviour, according to figures.

However, UK families have started to experience a slow-down in their spending power, as the rising cost of food, fuel and transport pile pressure on household finances.

Households had an average discretionary income of £201 per week in August, following a 5.3% rise in spending power, according to the latest data from the Asda Income Tracker and the Centre for Economics and Business Research (Cebr) This amounts to £10 extra each week, compared to the same period last year.

Cebr economist Sam Alderson said: “UK households have continued to help to drive economic activity in the months following the referendum, clearly supported by further robust increases in household spending power.”

However, while August brought the 22^nd consecutive month of double-digit growth in spending power, growth has slowed, with the figure remaining relatively flat for the past five months.

Alderson said: “Whilst the initial turbulence has been navigated, improvements in household finances have slowed, a process that could accelerate if rising production costs begin to feed into prices at the tills.”

The report puts the slow down to rising input costs and limited wage growth, as well as increased transport costs and food prices – both up 0.9% in August.

However, it added that the interest rate cut earlier this year had helped to offset rising costs and resulted in a further fall in monthly mortgage payments.

In the labour market, the rate of unemployment across the UK held steady at 4.9%.

An Asda spokesperson said: “This month’s report is a mixed one for families. On the one hand it’s encouraging that we continue to see a rise in spending power, courtesy of low levels of essential item inflation, and cuts to interest rates. However, on the other hand, there are some trends beginning to emerge that consumers should be mindful of.

“With inflation predicted to creep up as we head towards 2017 and the potential for a continuation in the rising costs of some essentials, families will be watching their wallets with interest over the coming months.”