1. Asda Income Tracker Report: June 2015 Released: July 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: June 2015
Released: July 2015

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

3. Introduction
Asda Income Tracker
"This month's tracker brings yet more good news for households across Britain - as the summer holidays approach and the days are getting brighter the pressure on family budgets will be lighter and giving them a chance to spend more money on the things they want to do, rather than need to do.
"It's reassuring to see that Northern Ireland continues with its accelerated recovery and that the North East continues to benefit from a fall in unemployment."
Barry Williams Chief Customer Officer, Asda 3

4. Family spending power was up by £18 a week year on year
Headlines – Asda Income Tracker
Headlines
The average UK household had £189 a week of discretionary income in June 2015, up by £18 a week on the same month a year before.
While the rate of unemployment rose slightly in the latest reading, the combination of a further acceleration in wage growth and consumer price inflation falling back to zero in June provided meant that discretionary income rose once again this month.
Inflation is expected to pick up later in the year. However, with wage growth accelerating, increases in family spending power look likely to continue into 2016.
Family spending power was up by £18 a week year on year
in June
(an 10.4% annual increase)
“The continued and widespread increases in family spending power are good news for the UK economy, particularly given the global economic uncertainty surrounding China and Greece.”
“The increase in discretionary incomes over the last year appears to have supported a further pick up in retail spending in recent months. This looks likely to continue over the second half of the year and will provide a key driver of economic growth in the UK in 2015.”
Sam Alderson, Economist, Cebr 4

5. Constructing the Asda Income Tracker
Model
Total household
income
£736 per week
e.g. national insurance contributions, income tax
Net income
£619 per week - =
Taxes
£117 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
£189 per week
Net income
£619 per week - =
Cost of living
£430 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: June
Dashboard
Indicator
Annual percentage change
Recent trend
Regular earnings growth (May)
+2.8% (excl. bonuses)
Employment growth (May)
+0.9% (+265,000 employment on year)
Unemployment rate (May)
5.6% (-0.8 % points on year)
Net income
+3.2%
Mortgage costs
+0.2%
Food & non-alcoholic drinks
-2.2%
Vehicle fuels
-10.5%
Home electricity, gas & fuel
-3.1%
Essential item inflation
-0.2%
Family spending power
+10.4%
KEY
IMPROVING TREND
NO SIGNIFICANT CHANGE IN TREND
DETERIORATING TREND
* three-month average, to month stated **unemployment rate for three months to month stated 6

7. Income Tracker growth rises despite fall in employment
Income Tracker Trends
The Asda Income Tracker was £18 a week higher in June 2015 than a year before
Year-on-year change in Asda income tracker, £
• In June 2015, average household discretionary incomes excluding bonuses were 10.4 per cent higher than the same point 12 months before.
• This represents a slight uptick in the annual rate of growth of family spending power, despite the UK experiencing a fall in the level of employment in the latest reading.
• Essential item inflation fell slightly further below zero in June supported by further declines in the price of food.
• In addition to lower price levels, the continued acceleration in wage growth provided further support to the level of household spending power, helping to offset the impact of the rise in unemployment.
• Wage growth is particularly strong when bonuses are accounted for. Including the effect of bonus payments, discretionary incomes rose at the faster rate of 10.6 per cent in June. This is the first time in over a year that growth in this measure has outpaced the headline tracker. 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), June 2015
The Asda Income Tracker was £18 a week higher in June 2015 than a year before
• The average UK household had £189 a week of discretionary income in June 2015, up from £171 at the same point a year ago.
• Average earnings growth has experienced a strong upward trend since the middle of Growth in regular pay (exc. bonuses) hit 2.8% year-on-year in the three months to May.
• Households experienced a 3.2% rise in net income in the 12 months to June as the acceleration in earnings growth offset a slight fall in employment.
• The cost of essential spending fall, providing a boost to household spending power. Despite additional increases in the price of motor fuels in June, essential item inflation fell further below zero, helping households to stretch their weekly income further. 8

9. UK falls back into ‘noflation’ as summer sales season kicks in
Cost of living
Essential item inflation becomes slightly more negative in June
Annual inflation on the consumer price index (CPI), and essential item annual inflation
• After rising to 0.1% in May, headline consumer price inflation fell back to 0.0%.
• This means that the average price of the goods and services that consumers purchase is at the same level as it stood a year ago in June 2014.
• In line with the headline figure, annual essential item inflation fell slightly to -0.2% in June, compared with the -0.1% recorded in May.
• While the prices of food and motor fuels, which fell by 2.2% and 10.5% respectively in the year to June 2015, remain key factors in the current weakness in inflation, price growth has also softened when controlling for these products.
• Bank of England governor Mark Carney recently stated that he expects inflation to remain low in the coming months. The Bank’s latest forecasts suggest inflation will pick-up towards the end of this year, rising to just above 1% in December. 9

10. Falls in the price of food and clothing take inflation lower in June
Cost of living
The main factors affecting family costs in June were:
Inflation of selected goods, annual change to June 2015
• The largest downward contributions to the fall in inflation in June came from the prices of clothing, air transport and food.
• Summer fashion sales saw the price of clothing and footwear fall 0.4% between May and June taking prices 0.8% lower than the level in June 2014.
• The price of food and non-alcoholic beverages continued to decline, falling 0.2% between May and June. The downward effect came from a range of items including bread, cereals, sugar, jam, syrups, chocolate and confectionery.
• The cost of air fares grew only marginally in June this year, compared to a large increase in June last year. This weighed down on the headline inflation rate. 10

11. First rise in UK unemployment rate since the end of 2013
Labour Market
Regular earnings growth continues on its upward trend, rising to 2.8%
UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent
• The rate of unemployment in the UK rose to 5.6 per cent in the three months to May, up from 5.5% in the three months to April. This represents the first rise in the rate of unemployment since the three months to November 2013.
• While the number of unemployed people rose in the latest reading, there were still signs that the labour market as a whole is still recovering. For instance, the share of people employed part-time because they can’t find a full-time role continued to fall and now sits at its lowest level since the three months to April 2011.
• The improvements in the labour market are reflected in the upturn in earnings growth since the middle of Average regular earnings increased by 2.8% year-on-year in the three months to May, well above the 0.7% recorded in the same period a year ago and the fastest rate since 2008.
• Earnings growth including bonuses increased at an even faster rate of 3.2% in the three months to May.
5.6%
2.8% 11

12. Gross income growth remains above 2% across each region of the UK
Regional Trends
Strong pick-up in regular earnings growth in the service sector
Regional gross income, annual change to quarter indicated
• Households in the West Midlands and Scotland experienced an acceleration in the rate of gross income growth in the latest quarter. This was supported by falling rates of unemployment within these regions.
• The acceleration in gross income growth across the West Midlands means that households in the region experienced the greatest year-on-year increase in their gross incomes in Q Over the past year the region has seen the rate of unemployment fall by 1.5 percentage points.
• Over this period, the North East experienced a 2 percentage point fall in unemployment. However, compared with the West Midlands, the region has a higher share of public sector employment. Pay restraints in the public sector have meant that government workers have not seen the same pay rises as those in the private sector.
• The high share of public sector workers and a lack of labour market recovery have weighed on gross income growth in Wales, which remains the slowest part of the UK. 12

13. All but two regions have seen household spending power grow at over 10%
Regional Trends
Essential item inflation negative across most of the UK
Asda Income Trackers by region, annual % change to quarter indicated and annual £ change to latest quarter
• All regions of the UK saw double digit increases in household discretionary income over the last 12 months. These ranged from the £12 increase seen in Wales to the £22 increase recorded in London.
• Of the 12 areas of the UK, 10 experienced increases in household spending power of over 10%. Despite relatively slow growth in gross incomes, households in Northern Ireland once again saw the largest percentage increase in discretionary income, 17.4% year-on-year. However, the increase in pound terms, at £14 a week, was one of the smallest of all the regions reflecting the lower levels of spending power in Northern Ireland compared with the rest of the UK.
• While London saw one of the more subdued rates of discretionary income growth, thanks in part to higher essential item inflation, households experienced the largest increase in pound terms. This reflects the higher levels spending power in the capital.
+£14
+£16
+£19
+£18
+£19
+£16
+£16
+£22
+£17
+£18
+£20
+£18
+£12 13

14. Discretionary incomes rise above £200 in three regions
Regional Trends
Discretionary incomes rise above £200 in three regions
Discretionary incomes in London more than double the level in the North East
Average household discretionary income by region,
£ per week in quarter indicated
• Average household discretionary incomes in the East of England and the South East have both surpassed £200 a week. Households in the South East have experienced a £18 rise over the last 12 months to £200 a week, while household spending in the East of England rose by £20 to £211 a week.
• London remains well above the £200 level, with discretionary incomes rising by £22 to £254 a week. This is more than double the £125 a week of discretionary income that the average household in the North East has.
• However, while the gap between London and the rest of the UK has widened in pound terms, only Wales has seen household spending power increase at a slower rate than the capital. 14

15. Focus on Scotland and Northern Ireland
Regional Trends
Focus on Scotland and Northern Ireland
Annual % change in discretionary incomes,
Scotland
Annual % change in discretionary incomes,
Northern Ireland
• Growth in average discretionary incomes in Scotland accelerated further in Q Household spending power is now growing at 10.1 per cent year-on-year.
• Essential item inflation has fallen further to -0.4% in Scotland, helping to ease pressure on household finances.
• Scotland has also seen a sharp fall in unemployment in recent months. This has helped the unemployment rate decline by 1.4 percentage points, faster than the 0.8 percentage point fall in the UK as a whole.
• However, wage growth across Scotland has weighed on gross income growth compared with the UK. Like other devolved nations, Scotland has a relatively high share of its workforce employed in the public sector where wage growth remains weak.
• Northern Ireland once again experienced the strongest year on year growth in discretionary income of all parts of the UK.
• Household spending power rose by 17.4% in the year to Q However, in monetary terms, the £14 a week increase was below the growth seen across the UK as a whole.
• Households across Northern Ireland have particularly benefitted from the falling cost of essential items. Given that spending on these items represents a relatively high share of household expenditure, the lower prices for both vehicle and household fuel have significantly eased pressure on household budgets.
• Still, improvements in the country’s labour market trail those seen across the UK as a whole. Unemployment has fallen at a slower rate and the high share of public sector workers has weighed on wage growth. 15

16. 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, ; 16

17. 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) 17

18. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 2: Comparison of year-on-year change in Asda Income Tracker including and excluding bonuses 18

19. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 3: Twelve-month moving average of Income Tracker (excl. bonuses) level 19

20. 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
March 2011
March 2012
March 2013
£162
March 2014
£168
March 2015
£186
April 2011
April 2012
£165
April 2013
£167
April 2014
£170
April 2015
£188
May 2011
May 2012
May 2013
May 2014
£171
May 2015
June 2011
June 2012
June 2013
June 2014
June 2015
£189
July 2011
July 2012
July 2013
July 2014
£174
August 2011
August 2012
August 2013
August 2014
£173
September 2011
£161
September 2012
September 2013
September 2014
October 2011
October 2012
October 2013
October 2014
£177
November 2011
November 2012
November 2013
November 2014
£179
December 2011
December 2012
December 2013
December 2014
£181
2011 Average
2012 Average
2013 Average
2014 Average 20

21. Quarterly ASDA Income Tracker
Asda Income Tracker tables
Table 2: Average household Income Tracker, £ per week, current prices, excluding bonuses
Region
Q2 2013
Q2 2014
Q2 2015
Northern Ireland 81 95
North East
110
109
125
Wales
146
151
163
West Midlands
139
165
Yorkshire & Humber
147
150
166
East Midlands
153
169
North West
148
152
170
South West
171
Scotland
173
174
191
South East
180
182
200
East
188
192
211
London
230
232
254 21

22. 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

23. 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. 23

24. 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. 24

25. 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, June 2015 25