Analysis: The Government says pay is rising, but are consumers feeling better off?

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, Lidl and Poundland.

The Government 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.

The figures have unsurprisingly prompted a political row but what weight do they really carry for retailers?

For many retailers, the Asda Income Tracker has become a useful gauge of how consumers are doing.

The latest update was released by the grocer today. It did give some cause for optimism that pressure on consumers was easing. But it was not a 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.

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 the rhetoric of austerity.

Asda chief executive Andy Clarke said of the improvement in spending power: “I take this as a positive sign that a macroeconomic recovery is under way although, as a note of caution, 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. However until everyone feels this equally we’re not out of the woods.”

Independent retail analyst Nick Bubb observes: “Regarding consumer confidence, job security has improved but a lot of the jobs being created are low-paid or part-time so I can see why overall spending is constrained, outside London.”

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