Asda Income Trackeryour.asda.com/system/dragonfly/production/2015/03/...Asda Income Tracker Report: February 2015 Released: March 2015 Centre for Economics and Business Research ltd

© 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


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


“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


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


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


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


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


• 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


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


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


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%


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,

[email protected] ; 0113 826 4823

Amy Garbutt, Asda PR Manager,


For data enquiries please contact:

Sam Alderson, Cebr Economist,


Rob Harbron, Cebr Managing Economist,


Appendix

12

mailto:[email protected]





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


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


Monthly Asda Income Tracker Figure 3: Twelve-month moving average of Income Tracker (excl. bonuses) level


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


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


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




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


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


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


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


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

Documents

Asda Income Trackeryour.asda.com/system/dragonfly/production/2015/03/...Asda Income Tracker Report: February 2015 Released: March 2015 Centre for Economics and Business Research ltd