© Centre for Economics and Business Research 2017
Asda Income Tracker Report: May 2017
Released: June 2017
Centre for Economics and
Business Research ltd Unit 1, 4 Bath Street, London
EC1V 9DX
t 020 7324 2850
w www.cebr.com
M a k i n g B u s i n e s s S e n s e
© Centre for Economics and Business Research 2017
Essential
Spending
£443 per
week
Headlines – Asda Income Tracker • The average UK household had £194 a week of discretionary income in May 2017, down by
£3.77 a week on the same month a year before.
• The second consecutive month of falling family spending power confirms our expectations of a
trend change in the Income Tracker. Families are faced with broad-based increases in the
prices of essential goods and services while wage growth falls further behind.
• Inflation as measured by the Consumer Price Index stands at close to 3% now – largely a result
of the depreciation of sterling following the Brexit referendum. While the effect of higher oil
prices is slowly subsiding, we now see price increases across a range of product and service
categories – from food and drinks to recreation and culture.
• UK households will need to prepare for more challenging times in the future as neither a
sudden pick-up in wage growth nor a subsiding of inflation is expected for the rest of the year.
Headlines
2
Total household income £761 per week Taxes
£124 per
week =
Average family spending power
£194 per week
- -
Family
spending
power was
down by £4
a week year
on year
in March
(a 1.9%
annual
decrease)
© Centre for Economics and Business Research 2017
Asda Income Tracker Dashboard: May
Year-on-year
change Indicator
+1.7% Regular earnings growth* (Feb-Apr)
-0.4 p.p. Unemployment rate (Feb-Apr): 4.6%
+1.4% Net income (May)
+2.1% Food & non-alcoholic drinks inflation (May)
+7.5% Vehicle fuels (May)
+3.1% Clothing and footwear (May)
+2.3% Essential item inflation (May)
-1.9% Family Spending Power (May)
KEY IMPROVING TREND NO SIGNIFICANT CHANGE IN TREND DETERIORATING TREND
Dashboard
3
* three-month average, excl bonuses
Change to
previous period
+2.0% GDP (Q1 2017) +0.2% QoQ
-0.1 p.p.
-/+ 0.0 p.p.
CPI Inflation (May)
+2.9% +0.2% MoM
+0.0% MoM
+0.1% MoM
-0.6% MoM
+0.2% MoM
+0.5% MoM
-1.0% MoM
© Centre for Economics and Business Research 2017
Fall in family spending power accelerates
as wage growth disappoints
• The squeeze on household incomes intensified in May
with the Asda Income Tracker recording a fall of almost
£4 compared to the same month last year.
• This marks the second consecutive month with falling
family spending power. We expect this trend to
continue in the coming months.
• Households are exposed to a double whammy of
rising inflation and slowing nominal wage growth. This
leads to falling real, i.e. inflation adjusted, incomes.
• Inflationary pressures are now widely visible and no
longer only contained to rising fuel prices. Regular
earnings growth, on the other hand, has fallen below
2% year-on-year in the three months to April, despite
the low rate of unemployment.
• As a result, real incomes as well as family spending
power are falling.
Income Tracker Trends
Year-on-year change in Asda income tracker, £ The Asda Income Tracker was £3.77 a week lower
in May 2017 than a year before
-£15
-£10
-£5
£0
£5
£10
£15
£20
£25
£30
Ma
y-0
9
Nov-0
9
Ma
y-1
0
Nov-1
0
Ma
y-1
1
Nov-1
1
Ma
y-1
2
Nov-1
2
Ma
y-1
3
Nov-1
3
Ma
y-1
4
Nov-1
4
Ma
y-1
5
Nov-1
5
Ma
y-1
6
Nov-1
6
Ma
y-1
7
4
© Centre for Economics and Business Research 2017
Cost of living
The main factors affecting family costs in May
were:
• Inflation as measured by the Consumer Price Index rose
to 2.9% in the year to May, up from 2.7% in the previous
month. This is the highest inflation reading in four years.
• While electricity showed the highest price increase in May
at 7.7%, once again transportation was the category with
the largest contribution to inflation due to its bigger weight
in the consumer basket of goods. With almost 0.8
percentage points, transportation cost contributed twice as
much to headline inflation as the next most impactful
category, restaurants and hotels.
• The contribution from transportation cost would have been
even larger, but falling sea and air fares after Easter offset
some of the upward pressure from higher fuel costs and
more expensive new cars and motorcycles.
• Cheaper prices for gas led to a small negative contribution
to inflation.
Inflation of selected goods, annual rate (LHS) and contribution
to headline inflation (RHS)
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
-10%
-6%
-2%
2%
6%
10%
14%
18%
Rate of Inflation Contribution to inflation (in pp)
5
Inflation reaches four-year high in May
Vehicle fuel is a sub-category of Transport;
Gas and electricity are sub-categories of Housing & utilities
© Centre for Economics and Business Research 2017
Consumer Focus:
• In June, customers have told Asda how they are feeling about the economy and their finances. The data now shows that
over half of customers think their disposable income will fall in the next month. This figure has increased by 9% over the
last quarter.
• 82% of customers feel that the cost of living will also increase over the next month, which mirrors the inflationary rate of
essential items.
How are consumers feeling?
Negative
Neutral
Positive
• How do you feel about the current UK economy?
Rise
Fall
Stay the
same
• What will happen to your disposable income?
Rise
Fall
Stay the
same
• What will happen to the cost of day to day living?
Go up
Stay same
Go down
• What will happen to your gas and electricity
bills?
Doesn’t
apply
• Each month, Asda sends out a ‘Pulse of the Nation’ survey to see how consumers are feeling about the economy. This survey asks
around hundreds of individuals from across the UK various questions about their thoughts on the economy. See below the results:
© Centre for Economics and Business Research 2017
Subdued wage growth and welfare cuts
squeeze income growth across the board
Income Groups
Annual gross income growth, May 2017 Lower income households face stagnating income
growth
• Households in the lowest income quintile feel the squeeze
on in-work benefits as their gross income growth has
come to a halt. This demographic draws a larger share of
their overall income from state benefits and social
securities – welfare cuts therefore have a noticeable
impact on their income growth rates. According to our
calculations the level of benefits paid is at the same level
as in early 2015.
• Households in higher income quintiles draw an increasing
share of their income from wages and salaries meaning
that welfare cuts have less of an effect on their budgets.
• But as wage growth has been disappointing during the
post-crisis recovery, even for the highest income quintile
gross incomes have only increased by 1.6% in the year to
May – below the current rate of inflation.
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
7
© Centre for Economics and Business Research 2017
Only the highest income households able
to avoid falls in family spending power
Income Groups
Weekly Discretionary Income by Gross Income Quartile, May 2017, year-on-year growth in brackets
Discretionary income remains negative for the
poorest households
• Annual growth in discretionary income was negative for
all but the highest income quintile in May. While three
months ago the second-highest quintile still recorded
positive growth in discretionary incomes the persisting
pay squeeze and higher inflation have now also led to
a reduction in the family spending power for this group.
• The poorest households have to shoulder the biggest
decrease in discretionary incomes, with family
spending power standing 28% lower than in May 2016.
Considering that lower income households need to
dedicate a larger share of their net income to buying
essentials (such as food, housing and clothing) any
increase in prices hits these households especially
hard.
• Conversely, high income households can more easily
compensate for higher prices as essentials make up a
much smaller part of their weekly spending budget.
£-26 (-28%)
£47 (-12%)
£109 (-5%)
£255 (-1%)
£690 (+0%)
-£50
£50
£150
£250
£350
£450
£550
£650
£750
8
© Centre for Economics and Business Research 2017
Contact
Please find attached method notes and the tabulated date. Asda produces a
monthly income tracker report with a more comprehensive report every quarter.
For press enquiries please contact:
Jack Woodhead, Senior Press Officer, Corporate and People
[email protected] ; 0113 82 62852
For data enquiries please contact:
Kay Neufeld, Cebr Senior Economist,
[email protected] ; 020 7324 2841
Appendix
9
© Centre for Economics and Business Research 2017
Appendix
© Centre for Economics and Business Research 2017
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Ma
r-1
4
Ma
y-1
4
Ju
l-1
4
Se
p-1
4
No
v-1
4
Ja
n-1
5
Ma
r-1
5
Ma
y-1
5
Ju
l-1
5
Se
p-1
5
No
v-1
5
Ja
n-1
6
Ma
r-1
6
Ma
y-1
6
Jul-16
Se
p-1
6
No
v-1
6
Ja
n-1
7
Ma
r-1
7
Ma
y-1
7
Regular earnings growth (RHS) CPIH Annual Percentage Change
Essential item inflation
2.2%
Falling oil prices
initiate broad fall in
inflation in late 2014
Highest earnings growth rate
since the financial crisis leads to
strong increases in family
spending power
Wage growth throughout 2016
remains lacklustre
Annual percentage change in Consumer Price Index, essential item inflation and average weekly earnings
Wage growth falls further behind inflation
2.7%
1.7%
Asda Income Tracker tables
© Centre for Economics and Business Research 2017
-15%
-10%
-5%
0%
5%
10%M
ay-1
0
Nov-1
0
Ma
y-1
1
No
v-1
1
Ma
y-1
2
No
v-1
2
Ma
y-1
3
No
v-1
3
Ma
y-1
4
No
v-1
4
Ma
y-1
5
No
v-1
5
Ma
y-1
6
No
v-1
6
Ma
y-1
7
CPI Food and non-alcoholic drinks inflation Clothing and Footwear inflation
Inflation trends over time Asda Income Tracker tables
© Centre for Economics and Business Research 2017
Monthly Asda Income Tracker Asda Income Tracker tables
Asda Income Tracker (LHS) Asda Income Tracker annual % change (RHS)
Figure 1: Asda Income Tracker and year-on-year change (excluding bonuses)
13
-15%
-10%
-5%
0%
5%
10%
15%
20%
£130
£140
£150
£160
£170
£180
£190
£200
£210
Ja
n-1
0
Ma
y-1
0
Se
p-1
0
Ja
n-1
1
Ma
y-1
1
Se
p-1
1
Ja
n-1
2
Ma
y-1
2
Se
p-1
2
Ja
n-1
3
Ma
y-1
3
Se
p-1
3
Ja
n-1
4
Ma
y-1
4
Se
p-1
4
Ja
n-1
5
Ma
y-1
5
Se
p-1
5
Ja
n-1
6
Ma
y-1
6
Se
p-1
6
Ja
n-1
7
Ma
y-1
7
© Centre for Economics and Business Research 2017
£179 (+0.0%)
£377 (+0.5%)
£601 (+1.0%)
£927 (+1.4%)
£ 1,920 (+1.6%)
£0
£500
£1,000
£1,500
£2,000
£2,500
Gross weekly income by income quintile, May 2017, (year-on-year growth in brackets)
© Centre for Economics and Business Research 2017
Monthly Asda Income Tracker
Month Income tracker Month Income tracker Month Income tracker Month Income tracker
Table 1: Average UK household Income Tracker, £ per week, current prices, excluding bonuses
Income tracker Month
Asda Income Tracker tables
January 2013 £166 January 2014 £170 January 2015 £185 January 2016 £195 January 2017 £201
February 2013 £163 February 2014 £169 February 2015 £185 February 2016 £195 February 2017 £198
March 2013 £162 March 2014 £168 March 2015 £186 March 2016 £195 March 2017 £197
April 2013 £167 April 2014 £170 April 2015 £188 April 2016 £198 April 2017 £195
May 2013 £167 May 2014 £171 May 2015 £188 May 2016 £198 May 2016 £194
June 2013 £169 June 2014 £171 June 2015 £189 June 2016 £198
July 2013 £168 July 2014 £173 July 2015 £191 July 2016 £198
August 2013 £166 August 2014 £173 August 2015 £191 August 2016 £199
September 2013 £166
September 2014 £174
September 2015 £192
September 2016 £199
October 2013 £167 October 2014 £176 October 2015 £193 October 2016 £199
November 2013 £167
November 2014 £179
November 2015 £193
November 2016 £200
December 2013 £165
December 2014 £181
December 2015 £193
December 2016 £198
2013 Average £166 2014 Average £173 2015 Average £190 2016 Average £198
15
© Centre for Economics and Business Research 2017
Total household income for the United Kingdom is derived from the Living Costs
and Food Survey 2012 (released December 2013). This is updated on a monthly
basis using official statistics on average earnings, unemployment, social security
payments, interest rates and pension income. Earnings data from the Office for
National Statistics that is released in the month of the report refers to the previous
month. We forecast earnings data for the month of the report.
Taxes are subtracted from total household income to estimate the actual amount
that can be spent on goods and services, i.e. net income or disposable income.
The average amount of tax paid is calculated using the latest version of the Living
Costs and Food Survey. This is updated on a monthly basis using Office for
National Statistics data and Cebr modelling.
Method notes The Asda income tracker is calculated from the following equations:
• Total household income minus taxes
equals net income
• Net income minus basic spend equals
Asda income tracker
Method notes
16
© Centre for Economics and Business Research 2017
Method notes
Net income is calculated by deducting our tax estimate from our total household
income estimate.
Basic spend (cost of living) figures are updated using monthly consumer price
data and the trend growth rate in the volume of essential goods and services
purchased over the most recent ten year period. A full list of items constituting
basic (or ‘essential’) spending was created in collaboration between Asda and Cebr
when the income tracker concept was originally formed in 2008. This list is
available on request.
The Asda income tracker is a measure of ‘discretionary income’, reflecting the
amount remaining after the average UK household has had taxes subtracted from
their income and bought essential items such as: groceries, electricity, gas,
transport costs and mortgage interest payments or rent. The income tracker
measures the amount left over to spend on discretionary purchases such as
leisure and recreation goods and services.
These components are based on official
statistics and Cebr calculations.
Method notes
17
© Centre for Economics and Business Research 2017
Disclaimer
This report was produced by the Centre for Economics and Business
Research (Cebr), an independent economics and business research
consultancy established in 1993 providing forecasts and advice to City
institutions, government departments, local authorities and numerous
blue-chip companies throughout Europe. The main contributors to this
report are Cebr economists Kay Neufeld and Nina Skero.
Whilst every effort has been made to ensure the accuracy of the
material in this report, the authors and Cebr will not be liable for any
loss or damages incurred through the use of this report.
London, June 2017
Disclaimer
18