The average household’s discretionary income has risen by 25 per cent to £1,075 over the past 12 months, but consumers remain cautious about splashing out in stores.
Average monthly mortgage repayments down 20 per cent on last year have helped bring fixed monthly household costs down by 8 per cent in the period.
Families in work have more than £200 a month more to spend, Ernst & Young’s Annual Discretionary Income Study showed.
But Ernst & Young retail director Jason Gordon said that although households may have more money each month, the decline in house prices over the last year has “significantly eroded their overall wealth”.
He warned: “Alongside falling house prices, the bleak economic climate and fears of job losses have had a devastating impact on consumer confidence.
“Consequently, many consumers are using their increased monthly spending power to repair savings balances and pay off credit cards and other debts. These gains are certainly not being spent freely on the high street.”
Gordon expected retailers’ performance to remain sharply polarised. While value retailers, young-fashion specialists and grocers have held up during the recession, retailers of discretionary goods such as jewellery or those closely tied to the housing market, such as electricals and furniture groups, have suffered. “We expect trading in these sectors to remain tough in the second half of 2009, he said.
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