asda income trackeryour.asda.com/system/dragonfly/production/2012/02/23/19... · 2012-02-23 ·...

Asda Income TrackerReport: January 2012

Released: February 2012

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 02

Methodology update 03

Headlines 04

Constructing the Income Tracker 05

Dashboard 06

Data breakdown 07-11

Contact 12

Appendix: Graphs and tables 13-15

Methodology – updated 18-19

Disclaimer 20

Asda Income Tracker

Introduction

© Centre for Economics and Business Research 2012

Asda Income Tracker

2

Andy Clarke Asda President and CEO

“It's encouraging to see the cost

of basics improving, easing the

pressure on family spending

power and freeing up cash to

spend elsewhere.

“Families are making smart

choices, doing more with less and

staying optimistic about

maintaining their quality of life.”

Methodology update – January 2012The January 2012 edition of the Income Tracker report is based on an updated methodology. In order to keep the Income

Tracker model relevant and up to date we have decided to implement the following methodological changes:

- Use the most up to date ONS Living Costs and Food Survey (the 2011 edition, which covers

household expenditure and income in 2010)

- Reflect lower trend growth in the volume of essential goods and services in the post-financial

crisis environment by revising down our volume assumption to 0.5pc from 1.4pc.

This makes the latest Income Tracker data not directly comparable with previous versions, however the time series now

available is up to date as possible with the latest detailed data on household expenditure. See page 17 for how this

impacted the income tracker model in 2010.

In addition to the rebasing, a significant contributing factor to the improvement in January‟s annual decline in spending

power is the fact that the January 2011 increase in the VAT rate to 20.0 per cent is no longer shown in the annual price

comparison. However this price increase is still built into the cost of living and has a lasting effect on family purchasing

power.

The table below gives you an idea of the impact of these changes. As you can see, the new model behaves in the same

way as the old model. The changes have affected the absolute level of the income tracker and the year-on-year change;

however, the overall message of how discretionary incomes have developed has not changed.

A detailed briefing on the revisions is available on request.

Headlines

3 © Centre for Economics and Business Research 2012

.

Old version (£, YOY change in disposable income)

New version (£, YOY change in disposable income)

Dec 2011 -12 -10

Jan 2012 -11 -9

Headlines – Asda Income Tracker

The average UK household had £147 a week of discretionary income in

January 2012, 5.5 per cent less than a year before.

Annual consumer price inflation fell steeply again in January, down to 3.6 per

cent from 4.2 per cent over the year to December. This sharp slowdown is

largely due to the effect of last year‟s VAT rise not being repeated. However,

the level of discretionary spending power remains permanently lower as a

result of the VAT increase in January 2011.

During the three months to December 2011 average weekly earnings

(excluding bonuses) grew by 2.0 per cent year on year, up by 0.1 percentage

points on the three months to November but still well below the inflation rate.

Headlines

“Falling inflation and the slowdown in the rising cost of living is good news for consumers, and will ease the strain on family budgets.

“The last two years have seen significant erosions to real incomes as inflation soared, particularly in 2011. This is likely to be less of a problem through 2012 as the inflation rate heads back towards the Bank of England‟s 2.0 per cent target. While this is good news and the Asda Income Tracker is expected to continue to take steps towards stability, the on-going weakness in the labour market is a nagging concern.”

Charles Davis Head of Macroeconomics, Cebr

Asda family

spending

power down

5.5 per cent

year on year

in January

£9 a week

less


Constructing the Asda Income Tracker

Total householdincome

£695 per week

e.g.. wages, investment income,

pensions, social security, self

employment earnings

e.g.. national insurance

contributions, income tax

eg. 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

£121 per week

=-

Net income

£574 per week

Cost of living

£427 per week

=-

Net income

£574 per week

Average familyspending power

£147 per week


Asda Income Tracker Dashboard: January

Annual percentage changeIndicator

2.0% (excl. bonuses)Earnings Growth* (December)

8.4%Unemployment* (December)

Latest trend

1.7%Net income

0.9%Mortgage costs

3.6%Food

4.1%Petrol

7.4%Utilities

3.9%Essential item inflation

-5.5%Family spending power

KEY IMPROVEMENT NO SIGNIFICANT CHANGE DETERIORATION

Dashboard

6

* three months to month stated

Please note that the dashboard should be read in conjunction with the main body of the report


Declines on the Asda Income Tracker

continue to shrink

• Discretionary incomes are now 5.5 per cent lower

than twelve months ago. This marks a further

improvement on the pace of decline in recent months

– this is the lowest annual decline since June 2011.

• Growth of gross incomes (excluding bonuses)

remains weak, at just 1.7 per cent over the year to

January.

• However, a continued slowdown in the rising cost

of essential items is easing pressure on family

budgets. Annual growth in the price of essential

items is down to 3.9 per cent in January from 4.4 per

cent in the previous month.

• Once bonus payments are included in earnings,

family spending power declined year on year by £10,

again a drop of 5.5 per cent.

Trends


Year-on-year change in Asda income trackerThe Asda Income Tracker was £9 a week

lower in January 2012 than a year before

-£15

-£10

-£5

£0

£5

£10

£15

£20

£25

Jan

-08

Ju

l-08

Jan

-09

Ju

l-09

Jan

-10

Ju

l-10

Jan

-11

Ju

l-11

Jan

-12

• The Asda Income Tracker has recently seen a trend

of smaller annual declines, as consumer price

inflation drops back from its peak last year.

• Income growth is still very fragile though,

suggesting that improvements to real income will

remain elusive for some time to come.

• While 2011 was a year of soaring prices, economic

conditions in 2012 are likely to affect household

budgets and spending power in a different way as the

labour market becomes the dominant concern.

• The unemployment rate stood at 8.4 per cent during

the three months to December, up from 7.8 per cent

at the start of 2011. The Office for Budget

Responsibility (OBR) expects unemployment to reach

8.7 per cent in the final quarter of 2012, which is

expected to continue holding back wage growth.

Trends


Year-on-year change in Asda income tracker

Real income erosions slow further as price

pressures ease

The Asda Income Tracker was £9 a week

lower in January 2012 than a year before

-£15

-£10

-£5

£0

£5

£10

£15

£20

£25

Jan

-08

Ju

l-08

Jan

-09

Ju

l-09

Jan

-10

Ju

l-10

Jan

-11

Ju

l-11

Jan

-12

Inflation falls as impact of last year‟s

VAT rise no longer shown in figures

• The official measure of the rising cost of living slowed

notably in January, as the consumer price index (CPI)

rose over the year by 3.6 per cent. This is the second

consecutive sharp slowdown, and the largest two-

month fall in the rate in three years.

• A significant contributor to this sharp decline is the

fact that last January‟s rise in the VAT rate to 20.0 per

cent is no longer shown in the annual price comparison.

However this price increase is still built into the cost of

living and will have a long-lasting effect on family

purchasing power.

• The Bank of England predicts that the inflation rate

could fall beneath its 2.0 per cent target rate by the end

of 2012.

• However, the price of oil remains a key factor for

inflation. Oil prices have been rising steadily through

February as tensions persist in oil-producing countries.

Cost of living


Annual CPI inflation fell sharply in January to

3.6 per cent from 4.2 per cent in December

Inflation of selected goods, annual change to January 2012

0%

4%

8%

12%

16%

20%

Recre

ation &

culture

Clo

thin

g &

footw

ear

Resta

ura

nts

& h

ote

ls

Health

Food &

non-a

lc.

drink

Tra

nsport

Furn

iture

& h

ousehold

goods

Com

munic

ation

Education

Alc

ohol &

tobacco

Ele

ctr

icity

Gas

• Heating and power costs continue to be the main driver of the inflation rate. Gas prices rose over the year to January by 18.7 per cent and the cost of electricity grew by 13.2 per cent. However, after Autumn‟s price hikes the Big Six utility firms announced at the start of this year that they will be cutting power costs back by up to 5.0 per cent.

• The cost of transport rose significantly over the past year and is another key contributor to the headline rate. Petrol prices grew year on year in January by 4.1 per cent and diesel prices by 6.9 per cent, according to the AA.

• However, slowing fuel price growth is helping to bring down the headline inflation rate.

• Inflation still remains relatively high on many essentials but has fallen notably over the last few months.

Cost of living

10

Falling fuel price growth helps slow the

rising cost of living


The main factors putting pressure on

family discretionary income in January

were:

Inflation of selected goods, annual change to January 2012

0%

4%

8%

12%

16%

20%

Recre

ation &

culture

Clo

thin

g &

footw

ear

Resta

ura

nts

& h

ote

ls

Health

Food &

non-a

lc.

drink

Tra

nsport

Furn

iture

& h

ousehold

goods

Com

munic

ation

Education

Alc

ohol &

tobacco

Ele

ctr

icity

Gas

• The official ILO measure of unemployment remained

broadly unchanged during the quarter to December,

standing at 8.4 per cent for the second consecutive

reading.

• While this has not been higher since 1995, the actual

number of unemployed workers fell back marginally

compared to the three months to November. This

provides a respite from the seven consecutive months

of rising unemployment figures seen recently.

• Despite the latest check in the upward march of

joblessness, the OBR predicts that the unemployment

rate will rise to 8.7 per cent by the end of the year.

• Annual earnings growth increased to 2.0 per cent in

the three months to December from a previous reading

of 1.9 per cent. However, the pace of wage growth

remains well below the inflation rate, keeping pressure

on family budgets.

Net income

Rising UK unemployment halts for now,

although jobless levels remain high

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

De

c-0

5

Ju

n-0

6

De

c-0

6

Ju

n-0

7

De

c-0

7

Ju

n-0

8

De

c-0

8

Ju

n-0

9

De

c-0

9

Ju

n-1

0

De

c-1

0

Ju

n-1

1

De

c-1

1

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Unemployment rate Earnings growth

11

UK unemployment rate (LHS), per cent and 3-month

annual growth in regular pay (RHS), per cent


Unemployment rate stands at 8.4 per

cent in the three months to December

Data and Methodology

Please find attached the methodology and tabulated data.

Asda produces a monthly income tracker report, with a more

comprehensive report every quarter.

For further information please contact:

Jo Newbould

PR Manager

Email [email protected]

Tel 0113 826 3536

Appendix


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)


£120

£125

£130

£135

£140

£145

£150

£155

£160

£165

Ja

n-0

8

Ap

r-0

8

Ju

l-0

8

Oc

t-0

8

Ja

n-0

9

Ap

r-0

9

Ju

l-0

9

Oc

t-0

9

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oc

t-1

0

Ja

n-1

1

Ap

r-1

1

Ju

l-1

1

Oc

t-1

1

Ja

n-1

2

-15%

-10%

-5%

0%

5%

10%

15%

20%

Monthly Asda Income TrackerFigure 2: Comparison of year on year change in Asda income tracker including

and excluding bonuses

Asda income tracker including bonuses Asda income tracker excluding bonuses


Asda income tracker tables

-£16

-£12

-£8

-£4

£0

£4

£8

£12

£16

£20

£24J

an

-08

Ap

r-0

8

Ju

l-0

8

Oc

t-0

8

Ja

n-0

9

Ap

r-0

9

Ju

l-0

9

Oc

t-0

9

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oc

t-1

0

Ja

n-1

1

Ap

r-1

1

Ju

l-1

1

Oc

t-1

1

Ja

n-1

2

Monthly Asda Income Tracker

Month Income tracker Month Income tracker

£144

Month Income tracker

£158

Month Income tracker

£160

£143 £156 £160

£143 £157 £159

£143 £159 £158

£142 £158 £158

£140 £159 £157

£140 £160 £159

£138 £159 £158

£136 £159 £159

£137 £160 £159

£141 £160 £158

£151 £159 £154

January 2008

February 2008

March 2008

April 2008

May 2008

June 2008

July 2008

August 2008

September 2008

October 2008

November 2008

December 2008

February 2009

March 2009

April 2009

May 2009

June 2009

July 2009

August 2009

September 2009

October 2009

November 2009

December 2009

January 2009 January 2010

February 2010

March 2010

April 2010

May 2010

June 2010

July 2010

August 2010

September 2010

October 2010

November 2010

December 2010

Table 1: Average UK household Income Tracker, £ per week, current prices, excluding bonuses

Asda income tracker tables


Income trackerMonth

£156January 2011

February 2011 £154

March 2011 £154

April 2011 £150

May 2011 £150

June 2011 £150

July 2011 £150

August 2011 £147

September 2011 £145

October 2011 £146

November 2011 £146

December 2011 £144

2008 average £142 2009 average £159 2010 average £158 2011 average £149

January 2012 £147

Further detail on methodology updateFrom February 2012, the income tracker has been updated in two important ways:

1) From February 2012, the base data from which the Asda income tracker

is derived has been updated. Detailed data on family expenditure and income come from the Office for National

Statistics (ONS) Living Costs and Food Survey 2011 Edition, which covers household

expenditure and income in 2010. This makes the latest vintage of income tracker data not

directly comparable with previous versions – but the time series now available (as in

page 16 above) is up to date as possible with the latest detailed data on household

expenditure.

2) Reflecting lower trend growth in the volume of essential goods

and services in the post-financial crisis environmentOver time, as well as changes in price (as captured by monthly inflation data from the

ONS), the volume of goods and services purchased tends to grow. Indeed, adjusting for

changes in price, spending on essential goods and services grew by an average 2.7% per

annum between 1998 and 2007 – equivalent to 1.4% per household. However, in recent

years this growth rate has slowed and indeed turned negative. Hence, we have revised

down the assumed trend real growth rate in consumer spending on essentials per

household to the average real growth in spending on essentials over the latest 10 year

period: 0.5% per annum.

Methodology


The Asda Income Tracker in 2010 according to

the latest ONS data

Total householdincome

£674 per week

e.g.. wages, investment income,

pensions, social security, self

employment earnings

e.g.. national insurance

contributions, income tax

eg. 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

£117 per week

=-

Net income

£557 per week

Cost of living

£399 per week

=-

Net income

£557 per week

Average familyspending power

£158 per week


These data are then updated on a monthly basis using monthly ONS data

and Cebr analysis

Total household income for the United Kingdom is derived from the Living Costs

and Food Survey 2010 (released 2011). 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.

MethodologyThe 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

Methodology


Methodology

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.

Methodology


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 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, February 2011

Disclaimer


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