© centre for economics and business research 2013 asda income tracker report: august 2013 released:...

© Centre for Economics and Business Research 2013

Asda Income TrackerReport: August 2013Released: September 2013

Centre for Economics andBusiness Research ltd

Unit 1, 4 Bath Street, LondonEC1V 9DXt 020 7324 2850w www.cebr.com

M a k i n g B u s i n e s s S e n s e


Contents

Introduction 03Headlines 04Constructing the Income Tracker 05Dashboard 06Income Tracker trends 07Cost of living 09Labour market 11Contact 12Data charts & tables 13Method 17Disclaimer 19

Asda Income Tracker

2


“The positive news is that the UK is finally heading in the right direction along the road to economic recovery - but we can’t ignore the fact that this improvement hasn’t yet translated in real terms to more disposable income for families. “The economic reality is also very different across the regions and the benefits of the recovery will only be fully realised when actions are taken to reduce this structural deficit. “The income tracker is a core driver in helping us to understand and respond to the changing needs of consumers across the country and we are aware that rising food prices are a primary concern in the continued squeeze on budgets. We are investing heavily to keep this inflation at bay and encourage other retailers to take the same action in a bid to return the real pound to the pockets of consumers.”

IntroductionAsda Income Tracker

Andy Clarke Asda President and CEO

3


Headlines – Asda Income Tracker

The average UK household had £159 a week of discretionary income in August 2013, down from £161 in the same month a year before and continuing to remain well below the 2010 peak of £165.

Average household income growth slowed further, held down by the ongoing effects of the cap on benefits payment increases and by wage growth remaining at historically low levels. Gross income growth stood at 1.4 per cent in August, while net income growth was 2.1 per cent – boosted by April’s increase in the income tax free personal allowance.

The gap between income growth and annual increases in the cost of living widened this month, as prices rose by 2.9 per cent year on year, further eroding household spending power.

Headlines

“Although recovery in the overall UK economy continues to gather pace, the latest Asda Income Tracker results indicate that this is not yet feeding through into household finances.

“The latest slight decrease in the unemployment rate is welcome news, but until we see faster growth in wages, family spending power is likely to remain under pressure.”

Rob Harbron, Senior Economist, Cebr

Asda family spending

power was down by £2

a week year on year

(a 1.1% annual

decline)

4


Constructing the Asda Income Tracker

Total householdincome

£707 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

£589 per week

Cost of living

£430 per week

=-

Net income

£589 per week

Average familyspending power

£159 per week

Model

5


Asda Income Tracker Dashboard: AugustAnnual percentage changeIndicator

1.0% (excl. bonuses)Regular earnings growth* (Jul)

7.7% (-0.4 % points on year)Unemployment rate** (Jul)

Latest trend

2.1%Net income

2.4%Mortgage costs

4.1%Food

1.3%Vehicle fuels

7.8%Home electricity, gas & fuel

2.9%Essential item inflation

-1.1%Family spending power

KEY IMPROVEMENT NO SIGNIFICANT CHANGE DETERIORATION

Dashboard

* three months to month stated **unemployment rate for three months to month stated

0.9% (+275,000 employment on year)Employment growth* (Jul)

6


Discretionary spending power continues to fall back in August

• In August 2013, household discretionary incomes excluding bonuses stood 1.1 per cent lower than a year before, resulting in the second consecutive month of annual decline in family spending power.

• Household net income growth fell back further due to the effects of the cap on growth in benefits payments, persistent weakness in the rate of wage growth and a slowdown in employment growth.

• In addition, annual growth in the cost of living remains elevated, easily outpacing year-on-year increases in income.

• Once the effects of bonus payments are included, household discretionary incomes also fell back by £2 a week compared to August 2013, or 0.8 per cent, as the latest figures showed total pay growth moving into line with regular pay growth.

Income Tracker Trends

Year-on-year change in Asda income tracker, £The Asda Income Tracker was £2 a week lower in August 2013 than a year before

Aug-08

Dec-0

8

Apr-09

Aug-09

Dec-0

9

Apr-10

Aug-10

Dec-1

0

Apr-11

Aug-11

Dec-1

1

Apr-12

Aug-12

Dec-1

2

Apr-13

Aug-13

-£15

-£10

-£5

£0

£5

£10

£15

£20

£25

£30

7


• The average UK household had £159 a week in discretionary income in August 2013, down from £161 in the same month a year before and remaining well below the peak of £165 a week at the start of 2010.

• Gross household income growth continued to slow in the year to August to just 1.4 per cent due to the effects of austerity measures continuing to feed through and wage growth remaining very weak.

• However, thanks to the April 2013 increase in the income tax free personal allowance, net income growth was faster – at 2.1 per cent in August.

• Even this remains well below the 2.9 per cent annual growth in the cost of essentials, placing downward pressure on average household discretionary incomes.

• Including bonus payments, average UK households had £182 of discretionary income a week in August.

Contributions to annual change in the Income Tracker (excluding bonuses), August 2013

Income growth slows further, widening the gap with growth in cost of living

Income Tracker

Essential spending

Net Income

-£20 -£15 -£10 -£5 £0 £5 £10 £15

Income Tracker Trends

The Asda Income Tracker was £2 a week lower in August 2013 than a year before

8


Overall inflation falls but essential item inflation remains elevated

• Annual inflation on the consumer price index (CPI) fell back to 2.7 per cent in August, down from 2.8 per cent in July and the lowest rate since May 2013.

• The largest downward contributions to inflation came from the transport and clothing sectors. Clothing price inflation stood at 1.6 per cent in August, down from 2.5 per cent in July, as the introduction of Autumn clothing lines produced a smaller monthly price increase than in 2012.

• Similarly, petrol and diesel prices rose by less over August this year than last, helping to bring down the headline CPI measure.

• However, the essentials items measure of inflation continued to stand at 2.9 per cent for the second month as food prices rose faster in August.

• Inflation on the wider Retail Price Index measure of inflation stood at 3.3 per cent in August, up from 3.1 per cent in July.

Cost of living

Essential item inflation stood unchanged at 2.9 per cent in the year to August

Annual inflation on the consumer price index and essential item annual inflation

Au

g-1

1

Oc

t-1

1

De

c-1

1

Fe

b-1

2

Ap

r-1

2

Ju

n-1

2

Au

g-1

2

Oc

t-1

2

De

c-1

2

Fe

b-1

3

Ap

r-1

3

Ju

n-1

3

Au

g-1

3

0%

1%

2%

3%

4%

5%

6%

Essential items CPI

9


Cost of living

Food price inflation rises again although mortgage interest inflation continues to fallThe main factors putting pressure on family discretionary income in August were:

• Annual food price inflation rose to 4.1 per cent in August 2013, its highest rate since May, putting pressure on household budgets.

• In addition, year-on-year increases in the cost of home electricity and gas remain high, at 8.1 per cent and 8.3 per cent respectively.

• However, the downward movement in clothing and transport price growth has helped to offset these inflationary pressures.

• In addition, inflation on mortgage interest payments fell back further, to reach 2.4 per cent in the year to August 2013. This is the fifth consecutive slowdown in the rate from a high of 4.6 per cent in March 2013, helping to ease the pressure on UK mortgage holders.

Inflation of selected goods, annual change to August 2013

Recre

atio

n & C

ulture

Furnitu

re

Transp

ort

Vehic

le F

uel

Cloth

ing &

footw

ear

Resta

urants

& h

otels

Health

Food & n

on-alc

drin

k

Housing &

util

ities

Alcohol &

tobac

co

Elect

ricity G

as0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10


Labour Market

UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Unemployment rateRegular Earnings growth

• The unemployment rate fell to 7.7 per cent in the three months to July 2013, down from four consecutive readings at 7.8 per cent and reaching its lowest rate since October 2012.

• However despite the latest downward movement in the unemployment rate, employment growth is slowing and a record number of workers were employed part-time only because they could not find full-time work.

• The proportion of part-time workers unable to find full-time work rose to 18.4 per cent, or 1.45 million workers – a level that has not been surpassed since comparable data began in 1992.

• Regular pay growth stood at 1.0 per cent year on year in the three months to July, a level around which only minor fluctuations have been seen in 2013.

In addition, annual regular pay growth has slowed again

Unemployment reaches lowest in 8 months but many can’t find full-time work

11


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 further information please contact:

Bee RycroftPR Manager Email [email protected] 0113 826 3448

Amy GarbuttPR ManagerEmail [email protected]. 0113 826 3369

Appendix


mailto:[email protected]

mailto:[email protected]


Monthly Asda Income TrackerAsda 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)

Au

g-0

8

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

£130

£135

£140

£145

£150

£155

£160

£165

£170

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

13


Monthly Asda Income TrackerFigure 2: Comparison of year-on-year change in Asda Income Tracker including and excluding bonuses

Asda Income Tracker tables

Aug-08

Nov-08

Feb-0

9

May

-09

Aug-09

Nov-09

Feb-1

0

May

-10

Aug-10

Nov-10

Feb-1

1

May

-11

Aug-11

Nov-11

Feb-1

2

May

-12

Aug-12

Nov-12

Feb-1

3

May

-13

Aug-13

-£20

-£15

-£10

-£5

£0

£5

£10

£15

£20

£25

£30

Asda Income Tracker including Bonuses Asda Income Tracker excluding Bonuses

14


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

£100

£110

£120

£130

£140

£150

£160

£170A

ug

-08

No

v-0

8

Fe

b-0

9

Ma

y-0

9

Au

g-0

9

No

v-0

9

Fe

b-1

0

Ma

y-1

0

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


15


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 trackerMonth


January 2009 £159 January 2010 £165 January 2011 £162 January 2012 £154 January 2013 £157

February 2009 £157 February 2010 £165 February 2011 £159 February 2012 £153 February 2013 £154

March 2009 £159 March 2010 £164 March 2011 £159 March 2012 £153 March 2013 £153

April 2009 £163 April 2010 £162 April 2011 £155 April 2012 £156 April 2013 £159

May 2009 £162 May 2010 £162 May 2011 £155 May 2012 £158 May 2013 £159

June 2009 £163 June 2010 £162 June 2011 £155 June 2012 £160 June 2013 £161

July 2009 £164 July 2010 £164 July 2011 £155 July 2012 £161 July 2013 £160

August 2009 £163 August 2010 £163 August 2011 £153 August 2012 £161 August 2013 £159

September 2009 £163 September 2010 £164 September 2011 £151 September 2012 £159

October 2009 £164 October 2010 £164 October 2011 £152 October 2012 £158

November 2009£164

November 2010£163

November 2011£152

November 2012£158

December 2009£164

December 2010£160

December 2011£151

December 2012£155

2009 Average £162 2010 Average £163 2011 Average £155 2012 Average £157

16


Total household income for the United Kingdom is derived from the Living Costs and Food Survey 2011 (released December 2012). 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.

MethodThe Asda income tracker is calculated from the following equations:

• Total household income minus taxesequals net income

• Net income minus basic spend equals Asda income tracker

Method notes

17


Method

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

18


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 Rob Harbron, Scott Corfe and Charles Davis.

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 2013

Disclaimer

19

© centre for economics and business research 2013 asda income tracker report: august 2013 released:...

Documents

investment income

disposable income

headlines asda income

asda income tracker

net income growth

gross income growth

week of discretionary

business research