Government figures show a rise in pay but the Asda Income Tracker suggests that it is perhaps too soon for retailers to celebrate.

Pay and consumer spending - what do retailers need to know?

Why is this a hot topic?

Government numbers released last Friday indicated that most employed people’s take-home pay increased in real terms in the past year.

If so, it could be good news for retailers because pressure on discretionary income has been a constant through the recession and subsequent austerity of recent years, reflected in the rise of low-price retailers such as Aldi and Lidl.

What does the Government say?

The statistics indicate that, outside the richest 10% of the population, people’s wages were up by a minimum of 2.5% after taking into account tax cuts. That’s been contrasted with a CPI inflation rate of 2.4% in the year to April 2013.

Does that tally with what retailers are finding?

Not completely. For many retailers, the Asda Income Tracker has become a useful gauge of how consumers are actually doing.

The latest update was also released by the grocer last Friday.

It gave cause for optimism that pressure on consumers was easing, but not reason for unalloyed joy.

The Asda data showed that in December the average household had discretionary income of £158 per week, still below the £165 high of January 2010. The cash-in-purse difference amounted to just £2 a week year on year.

Food price inflation was down to 1.9%, less than half of the rate throughout much of last year. There were, however, steep rises in gas and electricity prices.

But do consumers feel richer?

Assuming that the Government figures reflect reality, an issue for retailers will be how soon people actually start to feel richer. There may be a lag before consumers acknowledge a change in their circumstances following years of grind and austerity rhetoric.

Asda chief executive Andy Clarke says of the improvement in spending power: “I take this as a positive sign that a macroeconomic recovery is under way, although the effects have yet to be felt in real terms by all families across the UK.

“Some regions are beginning to see the benefits of a stronger job market coupled with lower inflation. But there are still pockets of the country where this hasn’t filtered through. We’re on the right track with slow but steady economic stabilisation. Until everyone feels this equally we’re not out of the woods.”

Is it back to business as usual?

From a retailer’s perspective, consumers look unlikely to celebrate just yet - even if the Government tells them they are better off.