1. Asda Income Tracker Report: April 2015 Released: May 2015
M a k i n g B u s i n e s s S e n s e
Centre for Economics and
Business Research ltd
Unit 1, 4 Bath Street, London
EC1V 9DX t w
Report: April 2015
Released: May 2015

2. Contents
Asda Income Tracker
Introduction Headlines Constructing the Income Tracker 05 Dashboard Income Tracker trends Cost of living Labour market
Contact Data charts & tables Method update
Method notes
Disclaimer 2

3. Introduction
Asda Income Tracker
“During my 30 years in retail this is the first time I’ve seen essential item deflation and I know this will be welcomed by those stocking up their cupboards. What I’m seeing in my stores is a customer who’s better off financially than twelve months ago, but one who is still battle scared and choosing to save rather than spend on those extra treats.
Andy Clarke Asda President and CEO 3

4. Family spending power was up by £17 a week year on year
Headlines – Asda Income Tracker
Headlines
The average UK household had £187 a week of discretionary income in April 2015, up by £17 a week on the same month a year before.
Household spending power has continued to grow at some of the strongest rates recorded in the history of the income tracker. Families are benefitting from a range of factors including a continued pick-up in wage growth, falling unemployment and a further increase in the income tax free personal allowance, which rose by £600 at the start of April.
However, falling inflation, which turned negative in April for the first time since 1960, remains the most significant factor behind the rising spending power.
Family spending power was up by £17 a week year on year
in April
(an 10.1% annual increase)
“With inflation turning negative in April, concerns have once again been raised about the effect of deflation on the UK economy.”
“However, negative inflation is largely expected to be temporary. As such, the significant increases seen in household spending power should provide the economy with a major boost in In that sense deflation has helped rather than hindered the UK’s economic recovery.”
Sam Alderson, Economist, Cebr 4

5. Constructing the Asda Income Tracker
Model
Total household
income
£732 per week
e.g. national insurance contributions, income tax
Net income
£616 per week - =
Taxes
£116 per week
e.g. wages, investment income, pensions, social security, self employment earnings
i.e. take home pay
e.g. food, clothing, housing costs, bills, transport, communication costs, health, children’s schooling, house maintenance and repair
Average family
spending power
£187 per week
Net income
£616 per week - =
Cost of living
£429 per week
i.e. take home pay
e.g. holidays, cinema, theatre, eating out, toys, sports, savings, jewellery, national lottery and other gambling payments, computer software and games 5

6. Annual percentage change
Asda Income Tracker Dashboard: April
Dashboard
Indicator
Annual percentage change
Recent trend
Regular earnings growth (Q1)
+2.2% (excl. bonuses)
Employment growth (Q1)
+1.8% (+564,000 employment on year)
Unemployment rate (Q1)
5.5% (-1.3 % points on year)
Net income
+2.9%
Mortgage costs
+0.3%
Food & non-alcoholic drinks
-2.8%
Vehicle fuels
-12.3%
Home electricity, gas & fuel
-2.8%
Essential item inflation
-0.3%
Family spending power
+10.1%
KEY
IMPROVING TREND
NO SIGNIFICANT CHANGE IN TREND
DETERIORATING TREND 6

7. Annual growth in the Income Tracker holds broadly steady in April
Income Tracker Trends
The Asda Income Tracker was £17 a week higher in April 2015 than a year before
Year-on-year change in Asda income tracker, £
• In April 2015, average household discretionary incomes excluding bonuses were 10.1 per cent higher than the same point 12 months before.
• Essential item inflation remained negative despite further increases in fuel prices through April. Unleaded prices rose 1.4p to 113.3p per litre. While the highest level seen since December 2014, the price of motor fuels remains 12.3% lower than a year ago.
• Household spending power continued to rise, supported by further increases in both nominal and real earnings growth.
• With average spending power having now risen year-on-year for nineteen months, families are experiencing the most sustained recovery in their finances since the financial crisis.
• Including the effect of bonus payments, discretionary incomes rose by the slower rate of 8.4 per cent in April. 7

8. Income Tracker Trends
Rising wage growth and falling inflation provide further boost to spending power
Contributions to annual change in the Income Tracker (excluding bonuses), April 2015
The Asda Income Tracker was £17 a week higher in April 2015 than a year before
• The average UK household had £187 a week of discretionary income in April 2015, up from £170 at the same point a year ago.
• With further falls in the price of goods and services pushing the headline inflation rate below zero in April, essential item inflation remained negative. This means that the typical household’s basket of essential purchases is costing less than it did at the same point in 2014.
• Additionally, workers have seen a continued acceleration in earnings growth since the middle of Regular pay grew by 2.2% in the 12 months to Q1 2015, its fastest rate since 2011.
• The combination of the pick-up in wage growth and additional increases in employment boosted household net incomes by 2.9% in the 12 months to April. 8

9. UK falls into deflation for the first time in 55 years
Cost of living
Essential item inflation remains at -0.3% in April
Annual inflation on the consumer price index (CPI), and essential item annual inflation
• With the overall price level for goods and services falling over the past year, the UK moved into deflation for the first time since 1960.
• Prices, as measured by the consumer price index (CPI), fell by 0.1% in the year to April, following ‘noflation’ in February and March.
• The Bank of England forecast that Britain would dip into negative inflation in April but predicts that the period of deflation will be temporary, with inflation likely to climb above 1% by the end of 2015.
• While headline inflation moved negative in April, essential price inflation has been negative since January 2015, reflecting the nature of the recent slowdown in inflation, which has largely been driven by falls in the prices of everyday essentials such as food, fuel and household gas.
• Despite rising prices for motor fuels, essential item inflation remained steady at -0.3% in April. 9

10. Cheaper airfares could see families looking to holiday abroad this year
Cost of living
The main factors affecting family spending costs in April were:
Inflation of selected goods, annual change to April 2015
• The largest downward contribution to the fall in inflation in April came from changes to the price of transport services, with the cost of air and sea transport providing the majority of this pressure.
• Air fares are now 5.3% lower than they were a year ago.
• Falling prices for essentials such as food, gas and electricity have, alongside motor fuels, been key factors in the sharp fall in inflation seen since the middle of Each of these categories saw further price falls in April, with food prices falling by a further 0.4%.
• This means the typical basket of food and non-alcoholic drink is now 3.8% cheaper than it was in April 2014. 10

11. Wage growth rises above 2% for the first time in over two years
Labour Market
Unemployment continues downward trend, falling to 5.5% in the first quarter of 2015
UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent
• The unemployment rate declined further in Q1 to 5.5%, down from 5.7% recorded in the final quarter of 2014.
• The rate of unemployment in the UK has fallen by 1.3 percentage points over the past year, taking the number of unemployed people to 1.83 million, around 386,000 fewer people than a year earlier.
• Alongside the tightening labour market, workers have seen wage growth accelerate since June This trend continued over the course of the first three months of 2015, with regular earnings growth hitting 2.2% in the three months to March, the highest level since April–June 2011.
• While wage growth has accelerated to a near four-year high, the rate remains well below the levels seen before the financial crisis. However, the fall in inflation has meant that earnings in real terms have risen sharply, hitting the fastest rate in almost seven years in the latest reading.
5.5%
2.2% 11

12. Data and Method
Appendix
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, ;
Amy Garbutt, Asda PR Manager, ;
For data enquiries please contact:
Sam Alderson, Cebr Economist, ;
Rob Harbron, Cebr Managing Economist, ; 12

13. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 1: Asda Income Tracker and year-on-year change (excluding bonuses)
Asda Income Tracker (LHS)
Asda Income Tracker annual % change (RHS) 13

14. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 2: Comparison of year-on-year change in Asda Income Tracker including and excluding bonuses 14

15. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 3: Twelve-month moving average of Income Tracker (excl. bonuses) level 15

16. Monthly Asda Income Tracker
Asda Income Tracker tables
Table 1: Average UK household Income Tracker, £ per week, current prices, excluding bonuses
Month
Income tracker
Month
Income tracker
Month
Income tracker
Month
Income tracker
Month
Income tracker
January 2011
£172
January 2012
£164
January 2013
£166
January 2014
£169
January 2015
£185
February 2011
February 2012
£163
February 2013
February 2014
February 2015
£184
March 2011
March 2012
March 2013
£162
March 2014
£168
March 2015
April 2011
April 2012
£165
April 2013
£167
April 2014
£170
April 2015
£187
May 2011
May 2012
May 2013
May 2014
£171
June 2011
June 2012
June 2013
June 2014
July 2011
July 2012
July 2013
July 2014
£173
August 2011
August 2012
August 2013
August 2014
September 2011
£161
September 2012
September 2013
September 2014
£174
October 2011
October 2012
October 2013
October 2014
£176
November 2011
November 2012
November 2013
November 2014
£179
December 2011
December 2012
December 2013
December 2014
£180
2011 Average
2012 Average
2013 Average
2014 Average 16

17. Method update note
Method notes
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. 17

18. Method notes Total household income minus taxes equals net income
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
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. 18

19. Method notes
Method notes
These components are based on official statistics and Cebr calculations.
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 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. 19

20. Disclaimer
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 20