asda income tracker

Asda Income Tracker Report: April 2012

Released: May 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

Headlines 03

Constructing the Income Tracker 04

Dashboard 05

Income Tracker trends 06

Cost of living 08

Labour market 10

Contact 11

Data charts & tables 12

Methodology update 16

Disclaimer 20

Asda Income Tracker

“Although the cost of essentials has fallen

and declines in disposable income have

slowed, the underlying story is not as

positive as it first appears.

“In real terms UK families have less cash in

their pockets now than they did a year ago -

and when you take a two-year view it’s clear

we’re facing the longest consecutive decline

in disposable income since the 1920s. We see

customers adapting their behaviour to a ‘new

normal’, making every penny count.

“In this environment holding down prices has

never been more important. We’re firm in our

commitment to help tackle this as family

finances remain tougher than ever before.”

Introduction

© Centre for Economics and Business Research 2012

Asda Income Tracker

2

Andy Clarke Asda President and CEO

Headlines – Asda Income Tracker The average UK household had £144 a week of discretionary income in April

2012, £6 less than twelve months ago.

While this is the joint-lowest that weekly discretionary incomes have been

since November 2008, the latest movement in the Income Tracker is an

improvement on previous year-on-year declines. Indeed, a £6 annual decrease

is the smallest since March 2011.

Annual consumer price inflation slowed sharply in April, falling to the lowest

rate in nineteen months at 3.0 per cent, down from 3.5 per cent in March.

During the three months to March 2012 average weekly earnings (excluding

bonuses) continued to grow by just 1.6 per cent year on year, remaining well

below the rate of inflation.

Headlines

“The slowing growth in the price of essentials seen in April is good news for UK households and eases the pressure on family budgets, as shown by the Income Tracker. “On the downside, labour market conditions are expected to continue acting as a constraint on income growth. Persistently weak wage increases look set to continue and as a result, further real income erosions are likely this year.” Charles Davis Head of Macroeconomics, Cebr

Asda family

spending

power down

4.2 per cent

year on year

in April

£6 a week

less

3 © Centre for Economics and Business Research 2012

Constructing the Asda Income Tracker

Total household income £698 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

£577 per week

Cost of living

£433 per week

= -

Net income £577 per week

Average family spending power

£144 per week


Model

Asda Income Tracker Dashboard: April

Annual percentage change Indicator

1.6% (excl. bonuses) Earnings Growth* (March)

8.2% Unemployment** (March)

Latest trend

1.6% Net income

0.5% Mortgage costs

4.3% Food

4.9% Petrol

6.3% Utilities

3.2% Essential item inflation

-4.2% Family spending power

KEY IMPROVEMENT NO SIGNIFICANT CHANGE DETERIORATION

Dashboard

5

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

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


Slowdown in the rising cost of living eases

pressure on household budgets

• Discretionary incomes excluding bonuses are now

4.2 per cent lower than twelve months ago.

• This is the smallest annual drop on the Asda

Income Tracker since March 2011, as the recent trend

of decreasing year-on-year declines continues.

• Annual growth in the price of essential items

slowed in April to the lowest since July 2010.

• However, household gross income growth is weak

and well below the speed of essential item inflation,

keeping family finances constrained.

• Once bonuses are included, family incomes

declined over the last year by 5.9 per cent, a drop of

£10. Bonus payments have dropped sharply this year,

following weak business conditions over the past

twelve months.

Trends


Year-on-year change in Asda income tracker, £ The Asda Income Tracker was £6 lower in

April 2012 than a year before

-£15

-£10

-£5

£0

£5

£10

£15

£20

£25

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

• Aside from a worsening in March, declines on the

Asda Income Tracker have been generally improving

since September 2011.

• The official inflation rate fell substantially in April,

easing pressure on household finances and

contributing to the smaller year-on-year decline in the

Tracker.

• However, continuing tough conditions in the labour

market are keeping the annual change in the Tracker

in negative territory. High levels of unemployment

mean wage growth remains subdued and well below

inflation.

Trends


The Asda Income Tracker was £6 lower in

April 2012 than a year before

Year-on-year change in Asda income tracker, £

Slowdown in the rising cost of living eases

pressure on household budgets

-£15

-£10

-£5

£0

£5

£10

£15

£20

£25

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Growth in the cost of living slows

significantly in April

• Growth in the cost of living slowed notably in April.

The consumer price index (CPI) rose over the

previous twelve months by 3.0 per cent, down from

3.5 per cent annual inflation in March.

• This is the lowest that the headline inflation rate has

been in 19 months.

• However while the fall in inflation is good news for

consumers, the sharp drop is driven in part by the

timing of Easter. This came earlier in 2012 than 2011

and distorted air and sea transport prices.

• As such, it is unlikely that the rate of inflation will

keep up this pace of decline.

• Price growth on the broader Retail Price Index (RPI)

also slowed in April, reaching 3.5 per cent from 3.6

per cent the previous month.

Cost of living


Annual CPI inflation fell to 3.0 per cent in

April, the lowest since September 2010

Inflation of selected goods, annual change to April 2012

-5%

0%

5%

10%

15%

20%

Recre

ation &

culture

All

transport

Clo

thin

g &

footw

ear

Health

Resta

ura

nts

& h

ote

ls

Furn

iture

& h

ousehold

goods

Com

munic

ation

Food &

non-a

lc d

rink

Education

Vehic

le f

uel &

lubricant

Alc

ohol &

tobacco

Housin

g &

household

serv

ices

Ele

ctr

icity

Gas

• Despite gas prices falling over the last month, the cost of utilities remains a key factor putting pressure on family budgets. Electricity and gas charges were 8.1 and 15.4 per cent higher in April than twelve months before, while rent prices rose by 3.4 per cent over the year. • Food costs also contributed significantly to the headline inflation rate, rising year on year by 4.3 per cent. Within this figure, the largest effects came from meat and fruit. • Petrol and diesel prices continue to set new records and were 4.9 and 4.2 per cent higher in April than a year before. However the cost of a barrel of crude oil has fallen over the past month, which could feed through into lower prices at the pump later this year.

Cost of living

9

Utility, rent and food prices continue to

put pressure on household finances


The main factors putting pressure on

family discretionary income in April were:

Inflation of selected goods, annual change to April 2012

-5%

0%

5%

10%

15%

20%

Recre

ation &

culture

All

transport

Clo

thin

g &

footw

ear

Health

Resta

ura

nts

& h

ote

ls

Furn

iture

& h

ousehold

goods

Com

munic

ation

Food &

non-a

lc d

rink

Education

Vehic

le f

uel &

lubricant

Alc

ohol &

tobacco

Housin

g &

household

serv

ices

Ele

ctr

icity

Gas

• Unemployment fell back further during the three

months to March as the rate dropped to 8.2 per cent,

from 8.4 per cent the previous quarter.

• However while the total number of unemployed

workers fell, the number of those who have been out

of work for more than a year rose to the highest since

September 1996, reflecting weakness in the labour

market.

• In addition, job creation in the first quarter of 2012

was all part-time work. The number of full-time

workers declined over the quarter.

• Further signs of fragile employment conditions are

shown by pay growth. Regular pay growth remained

at 1.6 per cent, well below the inflation rate.

• Bonus payments fell year on year by 9.8 per cent,

taking total pay growth to just 0.6 per cent, the

slowest since the three months to May 2009.

Labour Market Unemployment falls again but pay

growth continues to trail inflation

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Ma

r-0

6

Se

p-0

6

Ma

r-0

7

Se

p-0

7

Ma

r-0

8

Se

p-0

8

Ma

r-0

9

Se

p-0

9

Ma

r-1

0

Se

p-1

0

Ma

r-1

1

Se

p-1

1

Ma

r-1

2

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

10

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

annual growth in regular pay (RHS), per cent


Slumping bonuses take total pay growth

to weakest since early 2009

Data and Methodology

Please find attached the methodology and the tabulated date.

Asda produces a monthly income tracker report with a more

comprehensive report every quarter.

For further information please contact:

Joanne Newbould

PR Manager

Email [email protected]

Tel 0113 826 3536

Appendix


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)


£120

£125

£130

£135

£140

£145

£150

£155

£160

£165

Ap

r-0

7

Ju

l-0

7

Oc

t-0

7

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

Ap

r-1

2

-15%

-10%

-5%

0%

5%

10%

15%

20%

Monthly Asda Income Tracker Figure 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


-£16

-£12

-£8

-£4

£0

£4

£8

£12

£16

£20

£24A

pr-

07

Ju

l-0

7

Oc

t-0

7

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

Ap

r-1

2

Asda Income Tracker tables

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

Asda Income Tracker excluding bonuses


£100

£110

£120

£130

£140

£150

£160

£170J

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

Ap

r-1

2


Monthly Asda Income Tracker

Month Income tracker Month Income tracker

£144

Month Income tracker

£159

Month Income tracker

£161

£143 £156 £160

£143 £157 £160

£144 £159 £158

£142 £158 £158

£140 £159 £157

£140 £160 £159

£138 £159 £159

£136 £159 £160

£137 £160 £160

£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


Income tracker Month

£156 January 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 £159 2011 average £149

January 2012 £147

February 2012 £146


March 2012 £145

April 2012 £144

Methodology update From 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 environment Over 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 Family Spending Survey data

Total household income £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 family spending power

£158 per week


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

and Cebr analysis

Methodology

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.

Methodology 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

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, May 2012

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