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Asda has warned that although shoppers will have more money in their pockets this Christmas they are likely to spend less than a year ago.

The average UK household had £193 of discretionary income in October, up by £17 a week (or 9.6%) compared with 2014, according to the supermarket’s latest income tracker. However, customer confidence still remains cautious ahead of the Christmas period despite the falling cost of fuel and electricity and gas.

Asda’s Christmas spending survey finds that two-thirds (68%) of consumers are planning to spend the same amount on Christmas this year as they did a year ago, while one in five (21%) are actually planning to spend less. Of those planning to spend more, 40% said they would splash out on more or better presents, and 38% on more indulgent food and drink.

The retailer said a drop of 2.7% on food and drink prices as deflation in the market continued would be a “welcome treat” for families, with a fifth planning to spend between £300 and £500 on seasonal celebrations.

“Christmas is a time of year when budgets are under the most scrutiny, which is why I’m pleased to see another strong rise in discretionary income and an easing of pressure on family finances,” added Asda president and CEO Andy Clarke.

“But what I’m hearing from my customers is a different story, discretionary income is on the rise but spending habits have changed – any extra money on the family account balance sheet is being saved and three-quarters of people are planning to spend the same or less than did last Christmas.”

Morning update

Shop prices fell by 2.1% in November as a result of the continuing battle for price in retail, according to the BRC-Nielsen Shop Price Index. Intense competition in the run up to Black Friday and lower commodity prices also helped pushed the figure to a joint record low for falling prices. Food reported annual deflation of 0.3%, down from a 0.4% fall in October. BRC chief executive Helen Dickinson said: “November also marked the 31st consecutive month of deflation and the 32nd consecutive month of non-food price drops. Non-food prices saw a remarkable 3.3% drop, driven largely by reductions in clothing, footwear, electricals, DIY, gardening and hardware prices. Although the survey period does not cover Black Friday, it is likely that some retailers were discounting early in November in order to spread consumer spending over a longer period.

“Food prices fell by 0.3% as the impact of past falls in oil, weaker demand in emerging markets and a strong pound, helped support a continued deflationary environment. Lower commodity prices will help food retailers to continue to offer the best possible prices. Coffee, lean hogs, soybean, and cattle feeder all demonstrated double-digit declines in the 12 months to the end of our survey period.”

French food group Danone (DA) has announced a €240m investment to build a new plant for its baby formula business in a bid to capitalise on growing demand internationally. The facility will be built in Cuijk in the Netherlands, with production expected to start in late 2017. It will be Danone’s largest investment in its European production capabilities, doubling capacity in the Netherlands. The output will be exported to more than 80 countries worldwide. “It will give us the capacity we need to meet rising demand for our early life nutrition products, and is consistent with our 2020 roadmap calling for strong, profitable and sustainable growth,” said Felix Martin Garcia, executive vice president of the Danone Nutricia early life nutrition division.

Yesterday in the City

Morrisons (MRW) looks likely to be demoted to the FTSE 250 after narrow escapes in previous quarters. Its shares were down 0.8% to 151.3p, following on from declines on Monday. The latest FTSE Index quarterly review comes this evening and it looks like Morrisons luck has finally run out - it was ranked 111th in the FTSE 100 index at close, with companies needing to be at 110 and above to automatically stay in. The supermarket’s market cap now stands at £3.53bn – down from £4.23bn back in October.

McColl’s Retail Group (MCLS) recorded a stellar share performance yesterday following its pre-close trading update. Sales 2.7% in its final quarter – and 3.1% in the full year – driven by the acquisitions of new stores, and the decline in like-for-like sales slowed 0.5% to 1.8% in the 13 weeks to 29 November and 1.9% in the full year. The stock finished 3.7% up at 142p.

British American Tobacco (BATS) finished flat for the day at 3,886.5p but only after a late-afternoon rally. The Dunhill and Lucky Strike owner was hit by allegations on BBC’s Panorama that employees had paid bribes to politicians and civil servants in east Africa. Shares were above 3,920p on Monday morning before the programme aired.

Poundland (PLND) had a better day after suffering some horrendous falls in shareholder value recently. Shares climbed 4.3% to 225p as investors were buoyed by CEO Jim McCarthy putting his money where his mouth is and buying more stock in the fixed-price retailer on Friday.

Shares in Majestic Wine (MJW) plunged 3.7% in the morning to 325.2p and stayed there for the rest of the day. Other fallers included Greencore (GNC), down 2% to 330.9p, and Sainsbury’s (SBRY), down 0.4% to 252.7p.

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