UK Consumer - Bills, Bills, Bills

Bills of the UK consumer – at Moneyweek.co.uk - the best of the week's international financial media.

The single most important factor influencing most decisions on retail spending and spending on services is the level of household income after payments of capital, interest on debt and other non-discretionary payments bills of various sorts have been made. We call this discretionary income. Our estimates suggest that UK household discretionary income growth has declined significantly, growing by only 0.5% in 2004. This low growth may provide a key insight into why retail sales growth is currently subdued.

In 2001, nominal retail sales spending rose 5.9%. In 2004, by contrast, nominal retail sales spending rose 4.7%, but in April this year, growth slowed to only 1.2% year on year. There are several potential explanations for this, and discretionary income growth does not have to slow for the consumer to slow their spending. However, several factors have had an impact on the discretionary income of households in recent quarters including energy bills and mortgage payments.

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