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

2. Contents
Asda Income Tracker
Introduction Headlines Constructing the Income Tracker 05 Dashboard Income Tracker trends Cost of living Labour market
Income Tracker by age groups 15
Contact
Historical trends
Data charts & tables Method notes
Disclaimer 2

3. 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 November 2016, up by £9 on the same month a year before.
In November households once more saw growth in discretionary incomes slow. The uptick in inflation is starting to be felt in consumers’ pockets, especially for those relying on their car or motorbike as fuel prices are on the rise.
Food prices in November were lower than in the same month a year ago. However, the deflationary pressures are slowly disappearing and we expect rising inflation also in this category in the coming months. On the income side, households saw decent increases in regular earnings. Continued low unemployment is starting to put pressure on companies to raise wages to compete for the best employees.
Family spending power was up by £9 a week year on year
in November
(a 4.5% annual increase)
“The decrease in spending power growth is more than a blip – after three months of falling growth rates there is no doubt that households’ discretionary income growth is on a downward trajectory. Rising prices for petrol and several services are eating into families’ budgets – prices for communication, health care but also for staying in hotels or eating in restaurants have all increased year-on-year in November.”
“Households’ weekly spending power is still increasing, but this might not be the case in The greatest danger stems from rising inflation paired with a flailing labour market. While wage growth has accelerated in the latest readings, employment growth has slowed and the claimant count is rising – an economic slowdown in 2017 could put additional pressure on the labour market”
Kay Daniel Neufeld, Economist, Cebr 3

4. Constructing the Asda Income Tracker
Model
Total household
income
£755 per week
e.g. national insurance contributions, income tax
Net income
£636 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
£636 per week - =
Cost of living
£434 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 4

5. Annual percentage change
Asda Income Tracker Dashboard: November
Dashboard
Indicator
Annual percentage change
Recent trend
Regular earnings growth* (Oct)
+2.6% (excl. bonuses)
Employment growth* (Oct)
+1.1% (+342,000 employment on year)
Unemployment rate** (Oct)
4.8% (-0.4 % points on year)
Net income
+2.1%
Mortgage costs
-6.0%
Food & non-alcoholic drinks
-2.0%
Vehicle fuels
7.4%
Home electricity, gas & fuel
-1.6%
Essential item inflation
+0.5%
Family spending power
+4.5%
KEY
IMPROVING TREND
NO SIGNIFICANT CHANGE IN TREND
DETERIORATING TREND
* three-month average, to month stated **unemployment rate for three months to month stated 5

6. Downward trend in spending power growth continues in November
Income Tracker Trends
The Asda Income Tracker was £9 a week higher in November 2016 than a year before
Year-on-year change in Asda income tracker, £
Average household discretionary incomes excluding bonuses were 4.5% higher in November 2016 compared with the same month last year.
In November we saw a continuation of recent trends: growth in discretionary incomes has fallen below the 10£ mark and is set to fall even further in the months to come.
While discretionary incomes are beginning to be squeezed by rising inflation, households are still spending freely at the moment. Higher prices at the pump were again one of the main contributors for the slowdown in spending power growth.
For UK households petrol is becoming more expensive due to the weak pound on the one hand and rising oil prices globally on the other. 6

7. Essential item inflation at highest level since November 2014
Income Tracker Trends
Essential item inflation at highest level since November 2014
Contributions to annual change in the Income Tracker (excluding bonuses), November 2016
Net Income growth stood at £13 a week in November
The average UK household had £202 a week of discretionary income in November 2016, up from £193 at the same point a year ago.
Net income growth benefits from a strong labour market with subdued but stable increases in earnings. Low unemployment is starting to put more pressure on wages.
Essential item inflation accelerated to 0.5%, the fastest rate in two years.
For the time being the rise in essential item inflation is met by increases in wages. But we expect inflation to accelerate further in the coming year due to rising oil prices and the weak pound. 7

8. Inflation rises to 2 year high in November
Cost of living
CPI and essential item inflation continue on upward trend
Annual inflation on the consumer price index (CPI), and essential item annual inflation
Annual consumer price inflation rose to 1.2% in November, up from 0.9% the month before. This is the highest reading since October 2014.
Looking at the contributing factors behind the headline figure, prices for clothing, motor fuels, and various services rose. Acting in the opposite direction were air and sea fares which fell.
The rise in inflation was expected as the weak pound makes imports more costly. Moreover, the agreement of OPEC states to cut oil production put pressure on oil prices, leading to further price hikes at the pumps.
We expect inflation to continue to rise and reach 2.4% in 2017, cutting further into households’ discretionary spending power. 8

9. Fuel prices and services push up inflation
Cost of living
The main factors affecting family costs in November were:
Inflation of selected goods, annual change to November 2016
One of the most important contributors to higher inflation in November was the increasing cost for fuel. The price for petrol was 7.4% higher than in the same month last year, leading to a 2.5% overall rise in the cost of transportation, the highest rate in four years.
Food and non-alcoholic beverages were cheaper in November compared to the same month a year ago. For clothes, utilities, restaurant visits and hotel stays and several other services, families faced higher prices.
As in the previous month, households with a mortgage benefitted from falling mortgage interest payments.
Households also enjoyed cheaper food and non-alcoholic drinks than a year ago. 9

10. Higher prices for transport and restaurant and hotels drive inflation
Food and drink with the only negative contribution to inflation:
Contribution to annual CPI inflation in November 2016, in percentage points
High costs from transportation were the main driver of inflation in November. Within the category, fast rising fuel prices were the main reason why families are spending more on getting around in November.
Also restaurants and hotels were significantly more expensive last month compared to November 2015, contributing to higher overall inflation.
Food and non-alcoholic drinks make up a substantial part of households’ budget. The falling prices of food and drinks brought down inflation by 0.2 percentage points in November.

11. Low unemployment boosts earnings growth in November
Labour Market
Employment rate falls back slightly
UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent
• Total pay (including bonuses) growth edged up to 2.5% on the year in the three months to October. Excluding bonuses annual earnings growth rose to 2.6%.
• Regular earnings grew at the fastest level since August 2015, leading to increases in families’ net income.
• While earnings growth and unemployment show a labour market in good shape, some signs hint at an imminent slowdown. The employment rate fell from its record high. Between the three months to July and the following three month period, the number of people in work decreased slightly suggesting a slower rate of hiring by employers.
• Furthermore, the claimant count showed a monthly increase of 2,400 in the number of people claiming unemployment benefits in November. In total, 809,000 people claimed unemployment benefits, 23,500 more than in November 2015.
4.8%
2.6% 11

12. 30 to 49-year-olds receive twice the income of those aged 75 and above
Age Groups
Squeeze on benefits payments weighing on lower income households
Average weekly gross income by age group, November 2016, YoY growth in parentheses
Looking at household gross incomes by age group* we see that those aged 30 to 49 have the highest weekly income at around £960 per week or £45,500 per annum. Their weekly gross income is more than double that of those aged 75 and above, who have on average an income of £475 per week or £24,000 per year.
This can mostly be explained by considering a shift in the sources of income: household heads below the age of 64 predominantly receive their income from wages and salaries, while annuities and social security benefits are the biggest source of income for those aged 65 and above.
65 to 74 year olds receive 8% of their income from self-employment compared with 9% for 50 to 64-year-olds and 7% for 30 to 49-year-olds.
*Age groups determined via age of household representative person / main earner in household. 12

13. Middle-aged households see highest tax burden and essential spending
Age Groups
Under 30s spend most on housing and utilities
Average weekly tax burden and essential spending by age group, November 2016
While 30 to 49 year olds are those with the highest income, they also spend most on taxes and essential items.
Almost a fifth of their gross income is spend on taxes compared with only 7% of those aged 75 and over.
In comparison to other age groups, under 30s spend a relatively large share of their income on essentials. Almost two thirds of their gross income goes towards essential spending, compared to 54% for 50 to 64 year olds and 53% for over 75s.
A substantial part of the additional spending of younger households goes towards education, which becomes much less important for older generations.
26% of under 30s’ spending goes towards housing and bills. This is double the share of spending that baby boomers use for housing. 13

14. Baby boomers have highest weekly discretionary income
Age Groups
Baby boomers have highest weekly discretionary income
Negative growth in discretionary income for oldest households
Average weekly discretionary income by age group, November 2016, YoY growth in parentheses
Households where the main earner is aged 50 to 64 have the highest weekly discretionary household income at £266, well above the national average of £202.
While the younger age cohort of those aged 30 to 49 earns a higher gross income, higher tax rates and the cost of essential spending mean that the baby boomer generation ends up with the highest family spending power.
However, younger age groups have posted higher growth rates in discretionary incomes over the past months as they are catching up with the older generation.
For the oldest households, year-on-year discretionary income growth has been negative in five out of the last twelve months, potentially reflecting cuts to social welfare. 14

15. 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, ; 15

16. 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) 16

17. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 2: Comparison of year-on-year change in Asda Income Tracker including and excluding bonuses 17

18. Monthly Asda Income Tracker
Asda Income Tracker tables
Figure 3: Twelve-month moving average of Income Tracker (excl. bonuses) level 18

19. Inflation trends over time
Figure 4: Annual CPI, Food and non-alcoholics drinks inflation and Clothing and Footwear inflation

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 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
November 2016
December 2012
December 2013
December 2014
£181
December 2015
2012 Average
2013 Average
2014 Average
2015 Average
£190 20

21. 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. 21

22. 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. 22

23. 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 23