1. Asda Income Tracker Report: January 2016 Released: February 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: January 2016
Released: February 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 update
Method notes
Disclaimer 2

3. Introduction
Asda Income Tracker
“With discretionary incomes continuing to rise families will be able to enjoy more than just the weather this month. Household finances are improving, the purse strings are loosening and we’re seeing people preferring to spend their hard-earned cash on activities for all the family to enjoy.”
“What’s clear to me is that as family spending power shows no sign of abating and employment levels remain static, households can be confident in a bright summer ahead.”
Update
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 £197 a week of discretionary income in January 2016, up by £12 a week on the same month a year before.
Annual family spending power growth fell for the fourth consecutive month in January While pay growth stabilised in the latest reading, inflation continued to creep up in January which weighed slightly on annual growth in discretionary income.
However, despite the current trends in earnings and prices, household incomes continue to grow considerably faster than the cost of essential items. With some uplift in wage growth expected as a result of the National Living Wage, the outlook for family spending power remains positive.
Family spending power was up by £12 a week year on year
in January
(a 6.4% annual increase)
“Although growth in family spending power has declined in the latest data, the overall picture is positive. UK consumers have much more money to spend than a year ago”
“We expect continued falls in unemployment as well as rising earnings growth over the coming months. Combined with sustained low inflation, households should be in for a good time in 2016 as far as their finances are concerned. This comes despite broader concerns over the strength of the UK economy”
Sam Alderson, Economist, Cebr 4

5. Constructing the Asda Income Tracker
Model
Total household
income
£743 per week
e.g. national insurance contributions, income tax
Net income
£625 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
£197 per week
Net income
£625 per week - =
Cost of living
£428 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: January
Dashboard
Indicator
Annual percentage change
Recent trend
Regular earnings growth (Q4)
+2.0% (excl. bonuses)
Employment growth (Q4)
+1.7% (+521,000 employment on year)
Unemployment rate (Q4)
5.1% (-0.6 % points on year)
Net income
+2.3%
Mortgage costs
-0.7%
Food & non-alcoholic drinks
-2.6%
Vehicle fuels
-7.3%
Home electricity, gas & fuel
-3.7%
Essential item inflation
-0.1%
Family spending power
+6.4%
KEY
IMPROVING TREND
NO SIGNIFICANT CHANGE IN TREND
DETERIORATING TREND 6

7. Annual increase in spending power remains in double digits despite slowing
Income Tracker Trends
The Asda Income Tracker was £12 a week higher in January 2016 than a year before
Year-on-year change in Asda income tracker, £
• In January 2016, average household discretionary incomes excluding bonuses were 6.4% higher than the same month in 2015.
• Family spending power continued to increase in the first month of 2016, although year-on-year growth continues to slow.
• While overall inflation crept up slightly, post-Christmas discounts for clothing and footwear as well as falling prices in transportation kept price pressures muted, leading to higher discretionary spending in January 2016.
• Despite no notable improvement in wage growth, it remains well above inflation, supporting relatively robust improvements in family spending power.
• Employment across the UK continues to increase, placing further upward pressure on discretionary incomes. 7

8. Discretionary income growth held back by more moderate rises in wages
Income Tracker Trends
Discretionary income growth held back by more moderate rises in wages
Contributions to annual change in the Income Tracker (excluding bonuses), January 2016
The Asda Income Tracker was £12 a week higher in December 2015 than a year before
• The average UK household had £197 a week of discretionary income in January 2016, up from £185 at the same point a year ago.
• Driven by the slowdown in average wage growth, net incomes rose by 2.3% year-on-year in January, down from rates around 3% recorded a year earlier.
• Still, net income growth remains relatively strong compared with overall price changes in the economy. As a result, while headline growth has slowed, we are continuing to see fairly robust increases in household’s discretionary income.
• Given the similar slowdown seen in total pay growth in recent months, year-on-year growth in spending power including the effect of bonuses has also slowed, sitting just below the headline rate at 6% in January. 8

9. Inflation slowly edges up - stands at 0.3% in January
Cost of living
However, essential item inflation remains negative at -0.1%.
Annual inflation on the consumer price index (CPI), and essential item annual inflation
• Annual consumer price inflation rose marginally for the third consecutive month, reaching 0.3% in January.
• In contrast to headline inflation, year-on-year price growth for essential items held steady, remaining at -0.1% due to strong downward pressure from groceries, mortgage interest payments and vehicle fuels.
•  While the steepest price falls in fuels and foods have begun to move out of the 12 month comparison, further weakness in global commodity prices and continued downward pressure in the retail sector have kept inflation well below the Bank of England’s 2% central target.
•  In fact, the Bank of England revised down it’s forecast for inflation over the coming years in its latest quarterly inflation report. The latest projections show inflation remaining below 1% throughout the coming year and only reaching its 2% target in the first quarter of 2018. 9

10. Price decreases in vehicle fuel slowing down
Cost of living
The main factors affecting family costs in January were:
Inflation of selected goods, annual change to January 2016
• The price of essentials such as food, clothing and vehicle fuels all declined between December and January providing further relief to household budgets. However, given the slightly sharper falls in the price of these goods a year ago, the annual rate of inflation did creep up in January.
• In contrast to rising house prices and rents across the country, mortgage interest payments have continued to become cheaper, down 1.8% compared with a year earlier. Competition among lenders has probably led to a greater pass-through of lower market interest rates.
• The sharp price increase in airfares which led transportation costs to be the main driver of inflation in December 2015 reversed in January Fares typically fall in January, but dropped considerably more than the same period a year ago leaving prices 2% cheaper than in January 2015. 10

11. Slow wage growth despite record numbers for employment and vacancies
Labour Market
However, wage growth continues to slow across the economy
UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent
• Unemployment in the UK remained unchanged at 5.1% in the three months to December Still, compared with the same time a year ago, the rate is down by 0.6 percentage points.
• At 74.1% the employment rate, i.e. the proportion of people aged in work, reached a new record high in Q Similarly, a record number of vacancies in the three months to November reflects solid job creation from businesses.
• Despite these strong figures, wage growth is still slow. Average weekly earnings, excluding bonuses, rose by 2.0% year-on-year, only marginally faster than the month before.
• Still, with the high number of vacancies and unemployment at rates not seen since before the financial crisis, the increasingly tight labour market should help to support wage growth during the course of the year.
5.1%
2.0% 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, ;
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
March 2012
March 2013
£162
March 2014
£168
March 2015
£186
April 2012
£165
April 2013
£167
April 2014
April 2015
£188
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
£191
August 2012
August 2013
August 2014
£172
August 2015
September 2012
September 2013
September 2014
£174
September 2015
£192
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 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 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, February 2016 20