1. Asda Income Tracker Report: April 2016 Released: May 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: April 2016
Released: May 2016

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 notes
Disclaimer 2

3. Introduction
Asda Income Tracker
“April was the first time that discretionary income reached the £200 level since the Asda Income Tracker began, which is a significant milestone for consumer spending power. Double-digit growth in household income is clearly good news for UK consumers, although we continue to see them take a prudent approach to spending on everyday items.
“Looking ahead, the outlook remains cautiously optimistic, which is encouraging and should give consumers a boost as we head into summer. Although, whilst inflation is likely to recover over the coming year, the uncertainty over the EU referendum makes it difficult to forecast long term consumer confidence.”
Andy Clarke, Asda President and CEO 3

4. Family spending power was up by £12 a week year on year
Headlines – Asda Income Tracker
Headlines
The average UK household had £200 a week of discretionary income in April 2016, up by £12 a week on the same month a year before.
While businesses are experiencing the effects of uncertainty and lower confidence levels, households remain in a fairly positive environment, with wage growth continuing to outstrip changes in prices.
This environment is boosted by continued increases in the income tax free personal allowance, which rose £400 at the beginning of April, putting more money in the pockets of the nation’s households.
Family spending power was up by £12 a week year on year
in April
(a 6.3% annual increase)
“Uncertainty surrounding the outcome of the UK’s referendum on EU membership and the underlying health of the British economy have weighed heavily on the confidence of businesses in recent months.”
“In contrast, the continuation of increasing household spending power has helped keep consumer confidence robust. As such, activity in the consumer side of the economy appears to have ridden the series of turbulent economic waves seen since the start of the year much better.”
Sam Alderson, Economist, Cebr 4

5. Constructing the Asda Income Tracker
Model
Total household
income
£748 per week
e.g. national insurance contributions, income tax
Net income
£630 per week - =
Taxes
£118 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
£200 per week
Net income
£630 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: April
Dashboard
Indicator
Annual percentage change
Recent trend
Regular earnings growth (Q1)
+2.1% (excl. bonuses)
Employment growth (Q1)
+1.3% (+409,000 employment on year)
Unemployment rate (Q1)
5.1% (-0.5% points on year)
Net income
+2.1%
Mortgage costs
-1.8%
Food & non-alcoholic drinks
-2.5%
Vehicle fuels
-7.5%
Home electricity, gas & fuel
-4.2%
Essential item inflation
-0.2%
Family spending power
+6.3%
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. Spending power rises in April but growth remains below level seen a year ago
Income Tracker Trends
The Asda Income Tracker was £12 a week higher in April 2016 than a year before
Year-on-year change in Asda income tracker, £
• In the fist quarter of 2016, average household discretionary incomes excluding bonuses were 6.3% higher than the same period in While this represents a slight acceleration from the rate recorded in April, annual growth remains well below the level recorded a year ago.
• In pound terms, annual growth remained in double digits, the 18th consecutive month that spending power growth has stood above £10 per week.
• While wage growth slipped in the latest data, inflation also fell back, helping to boost growth in spending power slightly this month.
• Wage growth remains well above the headline rate of inflation. Whilst inflation levels look set to recover over the coming year, they are only expected to move gradually towards target, which should help prolong boosts to household spending power. 7

8. Income Tracker Trends
Changes to income tax free personal allowance once again boost net income
Contributions to annual change in the Income Tracker (excluding bonuses), April 2016
The Asda Income Tracker was £12 a week higher in April 2016 than a year before
• The average UK household had £200 a week of discretionary income in March 2016, up from £188 at the same point a year ago.
• In line with slowing wage growth, net income growth slowed once again in April, down 0.1 percentage points to 2.1%. However, this was boosted slightly by another increase in the income tax free personal allowance, which rose to £11,000 from £10,600 in the previous financial year.
• Still, the boost was less generous than those seen in the past two years, particularly when you account for the frozen National Insurance threshold this year - this had risen in the past two years.
• Whilst fiscal changes have had less of an impact this April, households received an additional boost this month from a return to negative essential item inflation. 8

9. Earlier Easter holidays help inflation jump up in March
Cost of living
Essential item inflation ticks into positive territory
Annual inflation on the consumer price index (CPI), and essential item annual inflation
• After rising to 0.5% in March, annual consumer price inflation fell back to 0.3% in April. This represents the first fall in the headline rate of inflation since September 2015.
• Given the impact of the earlier Easter holidays, a drop in inflation was not surprising, factors such as air fares, which had pushed up inflation in March, provided some of the main downward contributions in the latest data.
• Interestingly, the drop in headline inflation also coincided with a fall in essential item inflation, which returned to negative territory for the first time since January.
• The largest downward pulls on inflation continue to come from essentials such as the price of food and drink and the cost of transport. These downward pressures are being offset largely by increases in the price of non-essentials such as hotels and restaurants. . 9

10. Cuts to social housing rents place downward pressure on inflation
Cost of living
The main factors affecting family costs in April were:
Inflation of selected goods, annual change to April 2016
• After rising during the Easter period, air transport costs were one of the main contributors to the fall in inflation in April, dropping 14.2% over the month. However, this effect was partly offset by sharper rises in the price of petrol and diesel compared with the same two months a year earlier.
• Clothing and footwear also provided a downward contribution to the latest inflation rate, with prices falling by 0.4% between March and April this year.
• There was also a downward contribution to the overall rate from changes in social housing rents. This follows an announcement from the Chancellor in the summer of 2015 that housing associations would have to cut social housing rents by 1% each year for four years starting in April 2016.
• In contrast, prices of cultural services, a category which includes items such as cinema admission tickets and video streaming subscriptions, rose by 3.8% month-on-month, placing some upward pressure on inflation. 10

11. Rate of unemployment remains unchanged over Q1 2016
Labour Market
Regular earnings growth slips back slightly in latest reading
UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent
• The rate of unemployment in the UK remained steady at 5.1% over the first three months of 2016, unchanged for the fourth consecutive reading.
• The employment rate over the same period stood at 74.2%, up slightly on the previous reading and its highest level on record.
• In terms of wages, the overall picture remains largely unchanged from the previous three months. For January to March 2016 average regular pay increased by 2.1% year-on-year, down slightly from the previous reading of 2.2%. In contrast, total pay growth including bonuses rose to 2%, up from the 1.8% in the three months to the end of February.
• The formal introduction of the National Living Wage (NLW) from the beginning of April is expected to place stronger upward pressure on wage growth in the coming readings.
5.1%
2.1% 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: Jennifer Devlin, Asda Media Relations Manager, ;
For data enquiries please contact:
Sam Alderson, Cebr 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 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
£200
May 2012
May 2013
May 2014
£171
May 2015
June 2012
June 2013
June 2014
June 2015
£189
July 2012
July 2013
July 2014
£173
July 2015
£192
August 2012
August 2013
August 2014
August 2015
£191
September 2012
September 2013
September 2014
£174
September 2015
October 2012
October 2013
October 2014
£176
October 2015
£193
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 16

17. 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. 17

18. 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. 18

19. 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 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, May 2016 19