1. Asda Income Tracker Report: October 2016 Released: November 2016
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: October 2016
Released: November 2016

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

3. Introduction
Asda Income Tracker
“After almost two years of positive double digit spending growth, we are now seeing a new trend emerge which will affect our customers and the amount of discretionary income they have access to each month.
“We are still seeing discretionary income grow year on year, which is encouraging, but with prices expected to rise, similar to what we have seen with fuel this month, there is a lot of uncertainty around the future as we move nearer to 2017.
“Like our customers, we will be watching the data closely over the coming months to see the impacts these changes will have on family purse strings.”
Asda spokesperson 3

4. Family spending power was up by £9 a week year on year
Headlines – Asda Income Tracker
Headlines
The average UK household had £202 a week of discretionary income in October 2016, up by £9 a week on the same month a year before.
The slowdown in spending power growth continues in October, confirming our expectations that households will have to live with smaller gains in discretionary incomes for the remainder of the year.
Compared to last month headline inflation fell back slightly in October, but this is expected to be temporary. For families, higher prices at the pump were one of the main contributors to positive essential item inflation. The weak pound has already pushed up producer prices, which will eventually force firms to increase their prices to stay profitable. We expect the income tracker to remain broadly steady for the rest of the year, but in 2017 discretionary incomes could actually decline.
Family spending power was up by £9 a week year on year
in October
(a 4.6% annual increase)
“Discretionary incomes continue to grow significantly slower than earlier this year. While the overall increase in inflation has paused in October, prices for certain items, such as vehicle fuel, have already begun to rise sharply. Over the next few months, price increases are expected to become visible also in other product categories.”
“For the second month in a row, households’ weekly spending power has risen by less than £10. Moderate wage increases continue to support income growth but going forward, we expect wage growth to remain flat as first signs of a slowdown in the labour market become discernible.”
Kay Daniel Neufeld, Economist, Cebr 4

5. Constructing the Asda Income Tracker
Model
Total household
income
£754 per week
e.g. national insurance contributions, income tax
Net income
£635 per week - =
Taxes
£119 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
£202 per week
Net income
£635 per week - =
Cost of living
£433 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: October
Dashboard
Indicator
Annual percentage change
Recent trend
Regular earnings growth (Sep)
+2.4% (excl. bonuses)
Employment growth (Sep)
+1.5% (+461,000 employment on year)
Unemployment rate (Aug)
4.8% (-0.5% points on year)
Net income
+2.0%
Mortgage costs
-5.1%
Food & non-alcoholic drinks
-2.4%
Vehicle fuels
4.7%
Home electricity, gas & fuel
-1.5%
Essential item inflation
+0.3%
Family spending power
+4.6%
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. Decrease in spending power growth continues in October
Income Tracker Trends
The Asda Income Tracker was £9 a week higher in October 2016 than a year before
Year-on-year change in Asda income tracker, £
• Average household discretionary incomes excluding bonuses were 4.6% higher in October 2016 compared with the same period in 2015.
• This means family spending power rose by less than 5% for the second month in a row, suggesting that we are seeing a reversal of the positive growth trend from 2015 and early 2016.
• In pound terms, weekly spending power rose by £8.8 compared to the same month a year earlier, slightly below the September figure.
• While certain items, such as vehicle fuel, are becoming more expensive, discretionary incomes benefitted from a marginal downtick in overall inflation in October and stable wage growth. 7

8. Essential item inflation remains well above 0% in October
Income Tracker Trends
Essential item inflation remains well above 0% in October
Contributions to annual change in the Income Tracker (excluding bonuses), October 2016
The Asda Income Tracker was £9 a week higher in October 2016 than a year before
• The average UK household had £202 a week of discretionary income in October 2016, up from £193 at the same point a year ago.
• Headline figures from the labour market are still strong with low unemployment and wage growth ticking up slightly, leading to a 2.0% increase in net incomes on the year.
• Essential item inflation stands at 0.3% in October, slightly down from the 0.4% in September but remaining well in positive territory. Higher costs for transportation, especially fuel costs, were partially offset by cheaper prices for food and drinks. 8

9. Inflation hike pauses in October
Cost of living
Food prices continue to decline
Annual inflation on the consumer price index (CPI), and essential item annual inflation
• Annual consumer price inflation stood at 0.9% in October, down from 1.0% last month.
• Compared to last month, rising prices for motor fuels put upward pressure on inflation which was offset by falling prices for toys and hotel stays. At the same time clothing prices and costs for education rose by less than they did a year ago.
• Similar to headline inflation, essential item inflation was marginally lower in October at 0.3%. Prices for clothes and footwear decreased compared to the same month a year ago as did food prices. Mortgage holders benefit from the lower bank rate, set by the Bank of England after the EU referendum to support the economy. Many households were able to decrease their mortgage interest payments, leading to a 5.1% decrease in the mortgage costs compared to last year.
• Driven by higher fuel prices, the cost for transport jumped by 2.2%, the sharpest increase in four years. 9

10. Lower bank rate reduces cost of mortgage payments in October
Cost of living
The main factors affecting family costs in October were:
Inflation of selected goods, annual change to September 2016
• Rising prices on the pump were one of the main contributors to inflation in October. After the slide in the oil price in 2015, households have long benefitted from falling fuel prices, but as oil is traded in US dollars, UK households will pay more for gas for some time to come.
• Further contributors to inflation this month were prices for communication which rose by 3.1% compared to the same month a year ago as well as higher prices in hotels and restaurants (up 2.6%)
• Falling prices for clothes compared to the same period last year offset some of the inflationary pressures.
• Prices for food and drink fell yet again in October, standing 2.4% lower than in the same month in 2015. 10

11. Inflation trends over time

12. Slight acceleration in regular earnings growth boosts net income
Labour Market
Unemployment falls further in the three months to September
UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent
• Unemployment reached a 11-year low in the three month to September at 4.8%.
• The employment rate, i.e. the share of people aged 16 to 64 in employment, remained at a record high of 74.5%. However, job growth slowed in the third quarter of this year.
•While the headline indicators suggest that the labour market continues its strong performance of recent months, some forward looking indicators are hinting at a slowdown. The number of people claiming unemployment benefits increased by 9,800 in October, almost five times the expected number.
• Regular earnings growth stood at 2.4% in the three months to September, slightly higher than in the previous months. However, as companies are becoming more reluctant in terms of hiring, wage growth is expected to remain flat.
4.8%
2.4% 12

13. Contact
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: Jennifer Devlin, Asda Media Relations Manager, ;
For data enquiries please contact:
Kay Neufeld, Cebr Economist, ; 13

14. 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) 14

15. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 2: Comparison of year-on-year change in Asda Income Tracker including and excluding bonuses 15

16. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 3: Twelve-month moving average of Income Tracker (excl. bonuses) level 16

17. 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 2012
£164
January 2013
£166
January 2014
£170
January 2015
£185
January 2016
£197
February 2012
£163
February 2013
February 2014
£169
February 2015
February 2016
March 2012
March 2013
£162
March 2014
£168
March 2015
£186
March 2016
April 2012
£165
April 2013
£167
April 2014
April 2015
£188
April 2016
£201
May 2012
May 2013
May 2014
£171
May 2015
May 2016
June 2012
June 2013
June 2014
June 2015
£189
June 2016
£202
July 2012
July 2013
July 2014
£173
July 2015
£191
July 2016
August 2012
August 2013
August 2014
August 2015
August 2016
September 2012
September 2013
September 2014
£174
September 2015
£192
September 2016
October 2012
October 2013
October 2014
£176
October 2015
£193
October 2016
November 2012
November 2013
November 2014
£179
November 2015
December 2012
December 2013
December 2014
£181
December 2015
2012 Average
2013 Average
2014 Average
2015 Average
£190 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 Kay Neufeld and Scott Corfe. 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, November 2016 20