Transcript Income Tracker Report August 2015

Asda Income
Tracker
Report: August 2015
Released: September 2015
© Centre for Economics and Business Research 2015
Making Business Sense
Centre for Economics and
Business Research ltd
Unit 1, 4 Bath Street, London
EC1V 9DX
t 020 7324 2850
w www.cebr.com
Asda Income Tracker
Contents
Introduction
Headlines
Constructing the Income Tracker
Dashboard
Income Tracker trends
Cost of living
Labour market
Contact
Data charts & tables
Method update
Method notes
Disclaimer
2
© Centre for Economics and Business Research 2015
03
04
05
06
07
09
11
12
13
17
18
20
Introduction
“The economy continues to go from strength to
strength and stability in the wider economy
remains the key driver behind an increase in
disposable income across the UK. Since the
economic collapse there has been a shift in
behaviour around spending versus saving and
even though we’ve seen family’s spending power
rise, households are choosing to save more
money for a rainy day.
Events such as this year’s Rugby World Cup
provide economies with a shot in the arm and
supporters visiting from across the world will be
pleased to see that a fall in the rate of inflation
across travel, hotel, sports equipment and
restaurant are all contributing to an increase in
disposable income.”
Andy Clarke Asda President and CEO
3
© Centre for Economics and Business Research 2015
Asda Income Tracker
Headlines – Asda Income Tracker
Headlines
The average UK household had £191 a week of discretionary income in August
2015, up by £18 a week on the same month a year before.
Following a couple of months of weak labour market data, employment growth
has returned in recent months and unemployment fell back to 5.5% in the three
months to July. In contrast with recent months, the improvements in
employment helped to boost the rate of discretionary income growth in August.
However, the main drivers of recent growth in household spending power
remain the low level of inflation, which dipped back to zero in August, and
faster wage growth.
“In the wake of the global headwinds emanating from the slowdown in the
Chinese economy, further evidence of strong growth in family spending power is
welcome news for the UK economy.”
“Even though Christmas is fast approaching, with wages rising at rates well
above inflation, households are in a great position to enjoy the Autumn months
and events such as the Rugby World Cup. ”
Sam Alderson, Economist, Cebr
4
© Centre for Economics and Business Research 2015
Family
spending
power was up
by £18 a week
year on year
in August
(an 10.7%
annual
increase)
Constructing the Asda Income Tracker
Total household
income
£739 per week
e.g. national insurance
contributions, income tax
-
e.g. wages, investment income,
pensions, social security, self
employment earnings
Net income
£622 per week
i.e. take home pay
5
=
Taxes
£117 per week
e.g. food, clothing, housing costs,
bills, transport, communication
costs, health, children’s schooling,
house maintenance and repair
-
Cost of living =
£431 per week
© Centre for Economics and Business Research 2015
Net income
£622 per week
i.e. take home pay
Average family
spending power
£191 per week
e.g. holidays, cinema, theatre, eating out,
toys, sports, savings, jewellery, national
lottery and other gambling payments,
computer software and games
Model
Asda Income Tracker Dashboard: August
Indicator
Regular earnings growth (July)
+2.9% (excl. bonuses)
Employment growth (July)
+1.3% (+413,000 employment on year)
Unemployment rate (July)
5.5% (-0.6% points on year)
Net income
+3.2%
Mortgage costs
-0.9%
Food & non-alcoholic drinks
-2.4%
Vehicle fuels
-12.9%
Home electricity, gas & fuel
-3.5%
Essential item inflation
-0.3%
Family spending power
+10.7%
KEY
IMPROVING TREND
* three-month average, to month stated
6
Annual percentage change
NO SIGNIFICANT CHANGE IN TREND
DETERIORATING TREND
**unemployment rate for three months to month stated
© Centre for Economics and Business Research 2015
Dashboard
Recent trend
Income Tracker Trends
Tenth consecutive month of double-digit
increases in spending power
The Asda Income Tracker was £18 a week
higher in August 2015 than a year before
Year-on-year change in Asda income tracker, £
£30
• In August 2015, average household discretionary
incomes excluding bonuses were 10.7% higher than the
same month in 2014. This represents the 23rd consecutive
month of annual growth in the income tracker.
• August continued the trend of double digit increases in
the income tracker. Households have seen year-on-year
increases in spending power for 10 consecutive months,
the strongest performance since 2009, when families
benefitted from the sharp falls in interest rates.
£25
£20
£15
£10
£5
• A sharp upturn in wage growth has also been a key -£15
factor in the pick-up in discretionary income growth. In
the three months to August, regular earnings growth hit
its highest level since the three months to January 2009.
7
© Centre for Economics and Business Research 2015
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
• This latest period of household spending growth has
£0
been heavily driven by the sharp fall in inflation from the
latter months of last year. Headline consumer price -£5
inflation has now stood at near-zero levels for seven
consecutive months.
-£10
Income Tracker Trends
Rising wage growth and falling inflation
provide further boost to spending power
Contributions to annual change in the Income
Tracker (excluding bonuses), August 2015
The Asda Income Tracker was £18 a week
higher in August 2015 than a year before
• The average UK household had £191 a week of
discretionary income in August 2015, up from £173 at
the same point a year ago.
Net Income
• Households experienced a 3.2% rise in net income
in the 12 months to August.
• The combination of faster wage growth, rising
employment and increases in the income tax free
personal allowance have all contributed to the robust
rate of growth in net incomes
• Spending power has also been supported by the
falling price of essential items, particularly food, fuel
and energy prices. With the Bank of England
maintaining the base rate at historic lows,
households are also benefitting from the continued
low levels of interest rates on mortgages and loans.
Essential spending
Income Tracker
-£5
8
© Centre for Economics and Business Research 2015
£0
£5
£10
£15
£20
£25
Cost of living
UK inflation dips back to zero in August
Essential item inflation remains negative and
falls further below zero
• The UK fell back into ‘noflation’ as headline
consumer price inflation dropped to 0.0% in August,
down from the 0.1% recorded in July.
6%
• This continues the trend of the previous six months
when inflation had been at or around zero.
4%
• However, the currently weakness in inflation largely
reflects falls in the prices of food and motor fuels.
These have reduced the annual rate of consumer
price inflation by approximately 0.7 percentage
points in August.
2%
© Centre for Economics and Business Research 2015
3%
1%
0%
-1%
-2%
-3%
CPI
Essential item
Aug-15
Feb-15
Aug-14
Feb-14
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
-4%
Feb-10
• Annual essential item inflation also fell back in
August, standing at -0.3% compared with -0.2% in
July.
5%
Aug-09
• It is likely that inflation will rise in the final few
months of this year as the effects of sharp falls in
the prices of these goods at the same time in 2014
fall out of the annual comparison.
9
Annual inflation on the consumer price index (CPI), and
essential item annual inflation
The prices of food and drink fall once
again in July
The main factors affecting family costs in
August were:
• The largest downward contribution to the fall in the
rate of inflation came from transport. The price of
motor fuels provided the main source of downward
pressure, with diesel prices falling by 6.2 pence per
litre and petrol by 2.4 pence per litre between July
and August.
• Prices for recreation and culture fell by 0.4%
between July and August and remain lower than
they were a year ago. The latest downward
movements were seen across a range of items,
most notably the prices of books and cultural
services fell in August.
• While falling prices for food and motor fuels
remain the key drivers of the weak inflation seen
through the year, a range of products have seen
prices decline on an annual basis. For example, the
cost of audio-visual equipment has fallen by 9.2%
over the past year.
10 © Centre for Economics and Business Research 2015
Cost of living
Inflation of selected goods, annual change to August 2015
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
Labour Market
Return to employment growth halts
temporary blip in the labour market
The unemployment rate fell to 5.5% in the three
months to July
4.5%
4.0%
7%
5.5%
3.5%
6%
3.0%
5%
2.9%
2.5%
4%
2.0%
3%
1.5%
Unemployment rate (LHS)
11 © Centre for Economics and Business Research 2015
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
0.0%
Jul-12
0%
Jan-12
0.5%
Jul-11
1%
Jan-11
1.0%
Jul-10
2%
Jan-10
• Regular earnings rose by 2.9% year-on-year on average
in the three months to July. This represents a sharp
improvement from the 0.8% growth recorded in the same
period in 2014 and the highest level in over six years.
8%
Jul-09
• One upside of the reduction in labour market slack is
the strong upturn in wage growth seen over the past
year.
5.0%
Jan-09
• The fall in the rate of unemployment in the latest
reading was supported by a pick-up in employment
growth in recent months, which had briefly turned
negative. However, while employment is growing, it is
growing at slower rates than those seen a year ago,
reflecting the tighter labour market.
9%
Jul-08
• Following two consecutive readings of 5.6 per cent, the
rate of unemployment returned to 5.5 per cent in the
three months to July.
UK unemployment rate (LHS), per cent and 3-month
annual growth in regular pay (RHS), per cent
Regular earnings growth (RHS)
Data and Method
Appendix
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:
Andrew Devoy, Asda PR Manager,
[email protected] ; 0113 826 4823
Amy Garbutt, Asda PR Manager,
[email protected] ; 0113 826 3369
For data enquiries please contact:
Sam Alderson, Cebr Economist,
[email protected] ; 020 7324 2874
Rob Harbron, Cebr Managing Economist,
[email protected] ; 020 7324 2864
12 © Centre for Economics and Business Research 2015
Asda Income Tracker tables
Monthly Asda Income Tracker
Figure 1: Asda Income Tracker and year-on-year change (excluding bonuses)
Asda Income Tracker (LHS)
13 © Centre for Economics and Business Research 2015
Aug-15
Apr-15
Dec-14
Aug-14
-15%
Apr-14
£130
Dec-13
-10%
Aug-13
£140
Apr-13
-5%
Dec-12
£150
Aug-12
0%
Apr-12
£160
Dec-11
5%
Aug-11
£170
Apr-11
10%
Dec-10
£180
Aug-10
15%
Apr-10
£190
Dec-09
20%
Aug-09
£200
Asda Income Tracker annual % change (RHS)
Asda Income Tracker tables
Monthly Asda Income Tracker
Figure 2: Comparison of year-on-year change in Asda Income Tracker including and excluding
bonuses
£30
£25
£20
£15
£10
£5
£0
-£5
-£10
Asda Income Tracker including Bonuses
14 © Centre for Economics and Business Research 2015
Asda Income Tracker excluding Bonuses
Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
May-10
Feb-10
Nov-09
Aug-09
-£15
Asda Income Tracker tables
Monthly Asda Income Tracker
Figure 3: Twelve-month moving average of Income Tracker (excl. bonuses) level
£190
£180
£170
£160
£150
£140
15 © Centre for Economics and Business Research 2015
Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
May-10
Feb-10
Nov-09
Aug-09
£130
Asda Income Tracker tables
Monthly Asda Income Tracker
Table 1: Average UK household Income Tracker, £ per week, current prices, excluding bonuses
Month
Income tracker
Month
Income tracker
Month
Income tracker
Month
Income tracker
Month
Income tracker
January 2011
£172
January 2012
£164
January 2013
£166
January 2014
£169
January 2015
£185
February 2011
£169
February 2012
£163
February 2013
£163
February 2014
£169
February 2015
£184
March 2011
£169
March 2012
£163
March 2013
£162
March 2014
£168
March 2015
£186
April 2011
£166
April 2012
£165
April 2013
£167
April 2014
£170
April 2015
£187
May 2011
£166
May 2012
£168
May 2013
£167
May 2014
£171
May 2015
£188
June 2011
£166
June 2012
£169
June 2013
£169
June 2014
£171
June 2015
£189
July 2011
£166
July 2012
£170
July 2013
£168
July 2014
£173
July 2015
£191
August 2011
£163
August 2012
£169
August 2013
£166
August 2014
£173
August 2015
£191
September 2011
£161
September 2012
£168
September 2013
£166
September 2014
£174
October 2011
£162
October 2012
£166
October 2013
£168
October 2014
£176
November 2011
December 2011
2011 Average
£162
£161
£165
November 2012
December 2012
2012 Average
£167
£164
£166
16 © Centre for Economics and Business Research 2015
November 2013
December 2013
2013 Average
£167
£165
£166
November 2014
December 2014
2014 Average
£179
£180
£173
Method update note
From March 2014, the base data from which the Asda Income Tracker is
derived have been updated.
This is to account for the latest release from the Office for National
Statistics of the Living Costs and Food Survey: 2013 edition. This release
gives the detailed data required to compute the spending and income
figures for the average UK household that feed into the overall discretionary
income result. These updates are conducted on an annual basis, in line with
the release of the necessary datasets.
This update is required to continue to keep the Income Tracker as relevant
as possible, with the most up-to-date data available. The update makes the
latest vintage of the Income Tracker report and associated datasets not
directly comparable with previous editions. However, the new time series
data now available (e.g. in the tables and charts pages) provide the most
complete estimates and should be used for any time series analysis.
17 © Centre for Economics and Business Research 2015
Method notes
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
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.
18 © Centre for Economics and Business Research 2015
Method notes
Method notes
These components are based on official
statistics and Cebr calculations.
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.
19 © Centre for Economics and Business Research 2015
Method notes
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 Sam Alderson and Rob Harbron.
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, September 2015
20 © Centre for Economics and Business Research 2015
Disclaimer