Asda Income Tracker
Transcript of 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
4 © Centre for Economics and Business Research 2012
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
© Centre for Economics and Business Research 2012
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
6 © Centre for Economics and Business Research 2012
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
7 © Centre for Economics and Business Research 2012
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
8 © Centre for Economics and Business Research 2012
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
© Centre for Economics and Business Research 2012
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
© Centre for Economics and Business Research 2012
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
11 © Centre for Economics and Business Research 2012
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)
12 © Centre for Economics and Business Research 2012
£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
13 © Centre for Economics and Business Research 2012
-£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
14 © Centre for Economics and Business Research 2012
£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
Asda Income Tracker tables
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
15 © Centre for Economics and Business Research 2012
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
Asda Income Tracker tables
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
16 © Centre for Economics and Business Research 2012
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
17 © Centre for Economics and Business Research 2012
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
18 © Centre for Economics and Business Research 2012
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
19 © Centre for Economics and Business Research 2012
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
Disclaimer
20 © Centre for Economics and Business Research 2012