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© Centre for Economics and Business Research 2015
Asda Income Tracker Report: February 2015
Released: March 2015
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 2015
Contents
Introduction 03
Headlines 04
Constructing the Income Tracker 05
Dashboard 06
Income Tracker trends 07
Cost of living 09
Labour market 11
Contact 12
Data charts & tables 13
Method update 17
Method notes 18
Disclaimer 20
Asda Income Tracker
2
© Centre for Economics and Business Research 2015
“This month’s tracker brings positive news that
discretionary incomes continue to climb. It is
encouraging to see that going into the bank
holiday weekend the family budget has increased
by £16 since last year supported by low prices on
fuel, food and energy.”
“Our customers are feeling more confident yet
remain prudent by continuing to spend carefully
and save where they can for a rainy day. Above all
our customers are looking for reasons to be
confident that their discretionary income will
remain stable.”
Introduction Asda Income Tracker
Andy Clarke Asda President and CEO
3
© Centre for Economics and Business Research 2015
Headlines – Asda Income Tracker
The average UK household had £184 a week of discretionary income in
February 2015, up by £16 a week on the same month a year before.
The improvements in family spending power have been heavily supported by
improvements in the domestic labour market and a sharp fall in the rate of
consumer price inflation, which hit zero for the first time since 1960 in
February.
With inflation likely to remain subdued for much of this year, families should
enjoy further boosts to discretionary incomes even if wage growth remains at
its current levels.
Headlines
“With consumer price inflation falling to zero in February, a spell of deflation in
the UK looks more likely than not in the coming months.”
“The large declines in the cost of food and fuel over the last year have supported
a significant boost to household spending power. As long as households feel
confident enough to spend this windfall, deflation should be short-lived and
boost, rather than dent, economic activity.”
Sam Alderson, Economist, Cebr
Family
spending
power was up
by £16 a week
year on year
in February
(an 9.2%
annual
increase)
4
© Centre for Economics and Business Research 2015
Constructing the Asda Income Tracker
Total household income £729 per week
e.g. wages, investment income,
pensions, social security, self
employment earnings
e.g. national insurance
contributions, income tax
e.g. holidays, cinema, theatre, eating out,
toys, sports, savings, jewellery, national
lottery and other gambling payments,
computer software and games
e.g. food, clothing, housing costs,
bills, transport, communication
costs, health, children’s schooling,
house maintenance and repair
i.e. take home pay
i.e. take home pay
Taxes
£118 per week
= -
Net income
£611 per week
Cost of living
£427 per week
= -
Net income £611 per week
Average family spending power
£184 per week
Model
5
© Centre for Economics and Business Research 2015
Asda Income Tracker Dashboard: February
Annual percentage change Indicator
+1.6% (excl. bonuses) Regular earnings growth* (Jan)
5.7% (-1.5 % points on year) Unemployment rate** (Jan)
Recent trend
+2.8% Net income
+0.4% Mortgage costs
-3.3% Food & non-alcoholic drinks
-16.6% Vehicle fuels
-2.4% Home electricity, gas & fuel
-0.3% Essential item inflation
+9.2% Family spending power
KEY IMPROVING TREND NO SIGNIFICANT CHANGE IN TREND DETERIORATING TREND
Dashboard
* three-month average, to month stated **unemployment rate for three months to month stated
+2.0% (+617,000 employment on year) Employment growth* (Jan)
6
© Centre for Economics and Business Research 2015
Annual growth in the Income tracker
continues to rise
• In February 2015, average household discretionary
incomes excluding bonuses were 9.2 per cent higher than
the same point a 12 months before.
• Essential item inflation remained negative in February,
primarily as a result of the falls in the price of fuel and
food since the middle of 2014.
• The falling cost of weekly essentials and further
employment growth has supported the strong boost to
household spending power experienced in recent
months.
• Average spending power has now risen year-on-year for
seventeen months, the most sustained recovery since the
Bank of England sharply cut the base rate in 2009.
• Including the effect of bonus payments, discretionary
incomes rose by the slower rate of 8.7 per cent in
February.
Income Tracker Trends
Year-on-year change in Asda income tracker, £ The Asda Income Tracker was £16 a week
higher in February 2015 than a year before
-£15
-£10
-£5
£0
£5
£10
£15
£20
£25
£30
Feb
-09
Ma
y-0
9
Au
g-0
9
No
v-0
9
Feb
-10
Ma
y-1
0
Au
g-1
0
No
v-1
0
Feb
-11
Ma
y-1
1
Au
g-1
1
No
v-1
1
Feb
-12
Ma
y-1
2
Au
g-1
2
No
v-1
2
Feb
-13
Ma
y-1
3
Au
g-1
3
No
v-1
3
Feb
-14
Ma
y-1
4
Au
g-1
4
No
v-1
4
Fe
b-1
5
7
© Centre for Economics and Business Research 2015
• The average UK household had £184 a week of
discretionary income in February 2015, up from £169 at
the same point a year ago.
• Essential item inflation fell further below zero in
February, largely supported by falls in the price of food
and fuel.
• The price of food has declined by 3.3% over the last 12
months - the largest annual fall in nearly 60 years.
• At the same time, the price of vehicle fuels has fallen
by 16.6% representing the largest drop since
comparable records began over a quarter of a century
ago.
• While regular pay growth has appears to have
plateaued, it remains above levels seen in recent years.
This has helped net incomes rise by 2.8 per cent year-
on-year in February.
Contributions to annual change in the Income
Tracker (excluding bonuses), February 2015
Record falls in the cost of food and fuel
boosts family spending power
-£5 £0 £5 £10 £15 £20
Income Tracker
Essential spending
Net Income
Income Tracker Trends
8
The Asda Income Tracker was £16 a week
higher in February 2015 than a year before
© Centre for Economics and Business Research 2015
Headline rate of inflation falls to zero, the
lowest rate in 55 years
• Annual consumer price inflation stood at 0.0 per cent
in the year to February 2015, down from the 0.3 per cent
recorded in January. This represents the lowest rate of
consumer price inflation recorded since 1960.
• After hitting zero in February, it looks likely that the
headline rate of inflation will fall into negative territory
in the coming months.
• However, in its latest inflation report, the Bank of
England suggested that any spell of deflation should
only be temporary in the UK and that the headline rate
should begin to return towards its target of 2% later in
2015.
• Further falls in the price of essentials such as food
and gas in February meant that essential item inflation,
which turned negative for the first time in six years last
month, dropped to -0.3 per cent from -0.1 per cent in
January.
Cost of living
Essential item inflation drops further below
zero in February Annual inflation on the consumer price index (CPI), and
essential item annual inflation
9
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Fe
b-0
9
Au
g-0
9
Fe
b-1
0
Au
g-1
0
Fe
b-1
1
Au
g-1
1
Fe
b-1
2
Au
g-1
2
Fe
b-1
3
Au
g-1
3
Fe
b-1
4
Au
g-1
4
Fe
b-1
5
CPI Essential item
© Centre for Economics and Business Research 2015
Cost of living
The main factors affecting family spending
costs in February were:
• Annual inflation is currently negative on a range of
goods and services.
• However, transport and food remain the two biggest
contributors to the drop in the rate of inflation
compared with a year ago, when consumer price
inflation was 1.7%.
• The price of food and non-alcoholic beverages is now
3.3 per cent below the level in February 2014. While falls
over the past 12 months can be seen across a broad
range of items, the declines in prices have been most
noticeable across vegetables and dairy products.
• The cost of transport has fallen by 2.7% over the past
12 months largely supported by a sharp fall in the cost
of vehicle fuels. The price of petrol and diesel fell
slightly in February. However, the drop was
considerably less pronounced than the fall seen in
January.
Inflation of selected goods, annual change to February 2015
-20%
-16%
-12%
-8%
-4%
0%
4%
10
Food and fuel remain the main
contributors to slowdown in inflation
© Centre for Economics and Business Research 2015
Labour Market
UK unemployment rate (LHS), per cent and 3-month
annual growth in regular pay (RHS), per cent
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Ja
n-0
8
Ju
l-0
8
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-11
Ja
n-1
2
Ju
l-1
2
Ja
n-1
3
Ju
l-1
3
Ja
n-1
4
Ju
l-1
4
Ja
n-1
5
Unemployment rate (LHS) Regular earnings growth (RHS)
• With 1.86 million unemployed workers, the UK
unemployment rate remained unchanged at 5.7 per cent in
the three months to January. The unemployment rate now
sits 1.5 percentage points below the level recorded during
the same period a year ago, representing a fall of 479,000
people.
• After five consecutive increases, the acceleration in
average pay growth appears to have stalled. Regular
earnings growth fell marginally to 1.6 per cent compared with
1.7 per cent in the three months to December.
• While pay growth has slowed in recent readings, it remains
above the levels seen throughout 2013 and 2014 and
significantly higher than current consumer price inflation.
• Further increases in employment have helped to support
the considerable rise in household spending power over the
past 12 months. Over the past year more members of the
typical household have moved into paid employment, which
is typically more lucrative than out-of-work benefits.
Unemployment rate remains unchanged at 5.7%
in three months to January
Upward trend in regular earnings
growth appears to have plateaued
11
5.7%
1.6%
© Centre for Economics and Business Research 2015
Data and Method
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,
Andrew.Devoy@Asda.co.uk ; 0113 826 4823
Amy Garbutt, Asda PR Manager,
Amy.Garbutt@Asda.co.uk ; 0113 826 3369
For data enquiries please contact:
Sam Alderson, Cebr Economist,
SAlderson@Cebr.com ; 020 7324 2874
Rob Harbron, Cebr Managing Economist,
RHarbron@Cebr.com ; 020 7324 2864
Appendix
12
© Centre for Economics and Business Research 2015
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
Fe
b-0
9
Ju
n-0
9
Oc
t-0
9
Fe
b-1
0
Ju
n-1
0
Oc
t-1
0
Fe
b-1
1
Ju
n-1
1
Oc
t-1
1
Fe
b-1
2
Ju
n-1
2
Oc
t-1
2
Fe
b-1
3
Ju
n-1
3
Oc
t-1
3
Fe
b-1
4
Ju
n-1
4
Oc
t-1
4
Fe
b-1
5
© Centre for Economics and Business Research 2015
Monthly Asda Income Tracker Figure 2: Comparison of year-on-year change in Asda Income Tracker including and excluding
bonuses
Asda Income Tracker tables
-£15
-£10
-£5
£0
£5
£10
£15
£20
£25
£30
Fe
b-0
9
May-0
9
Au
g-0
9
No
v-0
9
Fe
b-1
0
May-1
0
Au
g-1
0
No
v-1
0
Fe
b-1
1
May-1
1
Au
g-1
1
No
v-1
1
Fe
b-1
2
May-1
2
Au
g-1
2
No
v-1
2
Fe
b-1
3
May-1
3
Au
g-1
3
No
v-1
3
Fe
b-1
4
May-1
4
Au
g-1
4
No
v-1
4
Fe
b-1
5
Asda Income Tracker including Bonuses Asda Income Tracker excluding Bonuses
14
© Centre for Economics and Business Research 2015
Monthly Asda Income Tracker Figure 3: Twelve-month moving average of Income Tracker (excl. bonuses) level
Asda Income Tracker tables
15
£130
£135
£140
£145
£150
£155
£160
£165
£170
£175
£180
Fe
b-0
9
Ma
y-0
9
Au
g-0
9
No
v-0
9
Fe
b-1
0
May
-10
Au
g-1
0
No
v-1
0
Fe
b-1
1
Ma
y-1
1
Au
g-1
1
No
v-1
1
Fe
b-1
2
Ma
y-1
2
Au
g-1
2
No
v-1
2
Fe
b-1
3
Ma
y-1
3
Au
g-1
3
No
v-1
3
Fe
b-1
4
Ma
y-1
4
Au
g-1
4
No
v-1
4
Fe
b-1
5
© Centre for Economics and Business Research 2015
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 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 £168 February 2015 £184
March 2011 £169 March 2012 £163 March 2013 £162 March 2014 £168
April 2011 £166 April 2012 £165 April 2013 £167 April 2014 £170
May 2011 £166 May 2012 £168 May 2013 £167 May 2014 £171
June 2011 £166 June 2012 £169 June 2013 £169 June 2014 £171
July 2011 £166 July 2012 £170 July 2013 £168 July 2014 £173
August 2011 £163 August 2012 £169 August 2013 £166 August 2014 £172
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 £162
November 2012 £167
November 2013 £167
November 2014 £179
December 2011 £161
December 2012 £164
December 2013 £165
December 2014 £180
2011 Average £165 2012 Average £166 2013 Average £166 2014 Average £173
16
© Centre for Economics and Business Research 2015
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.
Method notes
17
© Centre for Economics and Business Research 2015
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
18
© Centre for Economics and Business Research 2015
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
19
© Centre for Economics and Business Research 2015
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, March 2015
Disclaimer
20
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