Asda Income Tracker. Report: December 2011 Released: January Centre for Economics and Business Research ltd

Transcription

1 Asda Income Tracker Report: December 2011 Released: January 2012 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

2 Contents Asda Income Tracker Introduction 02 Headlines 03 Asda Income Tracker model 04 Dashboard 05 Income Tracker trends 06 Cost of living 08 Labour market 10 Regional trends 11 Appendix 14 Asda Income Tracker tables 17 Methodology 19 Disclaimer 22 1 Centre for Economics and Business Research 2011

3 Introduction Asda Income Tracker It s encouraging to see the cost of essentials coming down, easing the pressure on family budgets and redressing some of last year s inflation. However we know jobs still matter, with the highest levels of unemployment for 17 years having a real impact on the way families feel. Unemployment drove the continued drop in disposable income in December, with a growing divide between the nations and regions. We re firm in our commitment to help tackle this in 2012, by creating new jobs, working with new communities and bringing Asda value to families. Andy Clarke Asda President and CEO 2 Centre for Economics and Business Research 2012

4 Headlines Asda Income Tracker Headlines The average UK household had 160 a week of discretionary income in December 2011, 7.2 per cent less than a year before. During the three months to November 2011 average weekly earnings (excluding bonuses) grew by 1.9 per cent year on year, up 0.1 percentage points on the three months to October but remaining well below pre-recession averages of over 4.0 per cent. Annual consumer price inflation continued to fall in December, down to 4.2 per cent from 4.8 per cent over the year to November. This is the third consecutive slowdown in the rate of inflation, and the sharpest fall in the rate in three years. Slowdowns in the rising cost of living as inflation falls is good news for UK consumers, taking some pressure off family budgets. However, weak employment prospects will increasingly act as a drag on household finances. Private businesses are reluctant to hire and this, combined with public sector job cuts, is likely to result in continued weak wage growth. Unfortunately it is expected to be some time before consumers start to see significant gains to real incomes. Asda family spending power down 7.2 per cent year on year in December 12 a week less Charles Davis Head of Macroeconomics, Cebr 3 Centre for Economics and Business Research 2012

5 Constructing the Asda Income Tracker Total household income 734 per week - e.g.. national insurance contributions, income tax Taxes = Net income 599 per week e.g.. wages, investment income, pensions, social security, self employment earnings 136 per week i.e. take home pay Net income 599 per week - e.g.. food, clothing, housing costs, bills, transport, communication costs, health, children s schooling, house maintenance and repair Cost of living = Average family spending power 160 per week i.e. take home pay 439 per week eg. holidays, cinema, theatre, eating out, toys, sports, savings, jewellery, national lottery and other gambling payments, computer software and games 4 Centre for Economics and Business Research 2012

6 Dashboard Asda Income Tracker Dashboard: December Indicator Earnings Growth* (November) Unemployment* (November) Net income Mortgage costs Food Petrol Utilities Essential item inflation Family spending power Annual percentage change 1.9% (excl. bonuses) 8.4% 2.1% 1.2% 3.9% 8.5% 7.9% 4.4% -7.2% Latest trend KEY IMPROVEMENT NO SIGNIFICANT CHANGE DETERIORATION * three months to month stated Please note that the dashboard should be read in conjunction with the main body of the report 5 Centre for Economics and Business Research 2012

7 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Pressure on family budgets eases as real income erosions slow Trends The Asda Income Tracker was 12 lower in December 2011 than a year before, as declines on the Tracker shrink Discretionary incomes are now 7.2 per cent lower than twelve months ago. Gross incomes (excluding bonuses) growth remains subdued, rising by just 2.1 percentage points over the year to December However, annual growth in the cost of essential items is slowing, down to 4.4 per cent over the year to December. This is the third consecutive deceleration in the rising cost of living, and helps to ease pressure on household finances. Year-on-year change in Asda income tracker Once the impact of bonus payments is included, family spending power declined over the period by 6.1 per cent, also a drop of Centre for Economics and Business Research 2012

8 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Pressure on family budgets eases as real income erosions slow The Asda Income Tracker was 12 lower in December 2011 than a year before, as declines on the Tracker shrink Annual consumer price inflation dropped back in December 2011 to 4.2 per cent, down from 4.8 per cent the previous month, and easing pressure on family budgets Year-on-year change in Asda income tracker Trends However, weak and worsening conditions in the UK labour market are pulling household finances in the opposite direction. Joblessness continues to steadily rise, with the unemployment rate increasing to 8.4 per cent during the three months to November. Employment conditions have not been worse since Income growth is held down by the high number of jobless workers, who lose bargaining power as a result of high unemployment. Average regular wages (i.e. excluding bonuses) grew annually by just 1.9 per cent during the three months to November Centre for Economics and Business Research 2012

9 Recreation & culture Clothing & footwear Health Food & non-alc. Drinks Restaurants & hotels Furniture & household goods Education Transport Communication Alcohol & tobacco Electricity Gas Rising cost of living slows sharply Cost of living Annual CPI inflation continued to slow in December, falling to 4.2 per cent from 4.8 per cent in November Price pressures on consumers continued to ease in December, as the consumer price index (CPI) rose by 4.2 per cent over the year. This is a the sharpest drop in the headline rate in three years, highlighting just how quickly price pressures are falling back from their recent high. 20% 15% 10% 5% Inflation of selected goods, annual change to December 2011 While this latest inflation reading is still more than double the Bank of England s 2.0 per cent target, December s move takes it further back toward it a trend that is expected to continue in % -5% Price growth on the broader Retail Price Index (RPI) also slowed in December, down to 4.8 per cent from November s 5.2 per cent. Despite falling inflation, the price of oil remains stubbornly elevated and if it starts to rise again, will likely have a significant upward effect on inflation. 8 Centre for Economics and Business Research 2012

10 Recreation & culture Clothing & footwear Health Food & non-alc. Drinks Restaurants & hotels Furniture & household goods Education Transport Communication Alcohol & tobacco Electricity Gas Slowing transport price growth helps ease pressure on household budgets Cost of living The main factors putting pressure on family discretionary income in December were: The cost of home utilities continues to be a major factor putting pressure on household budgets, after large prices over the second half of This category contributes a full percentage point to the headline rate, and gas and electricity prices rose by 19.8 and 14.1 per cent respectively over the year to December. 20% 15% 10% 5% Inflation of selected goods, annual change to December 2011 Transport is another key contributor to the headline rate of inflation, as petrol prices rose over the year to December by 8.5 per cent, and diesel prices by 11.8 per cent. However, the cost of petrol fell during December itself this movement, compared to a strong rise during the same month in 2010, contributed significantly to this month s slowdown in the rising cost of living. 0% -5% Further downward effects on inflation came in December from clothing, food, alcohol and tobacco, where prices fell faster this year than in December twelve months before. 9 Centre for Economics and Business Research 2012

11 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 UK employment conditions continue to worsen Unemployment continues to steadily rise, reaching 8.4% in November The official ILO measure of unemployment gave further bad news for the UK economy for the three months to November 2011, as the unemployment rate rose to 8.4 per cent, up from a previous reading of 8.3 per cent. This is the highest that the rate has been since November 1995 while the actual number of unemployed workers, 2.7 million, has not been higher since in August Unemployment is expected to rise further over Private sector companies indicate intentions to hold employment levels steady or marginally reduce headcounts at the same time as planned public sector job cuts are expected. 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% UK unemployment rate (LHS), per cent and 3-month annual growth in regular pay (RHS), per cent Net income 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Unemployment rate Earnings growth 10 Centre for Economics and Business Research 2012

12 Northern Ireland North East Yorkshire & Humber North West Wales Scotland South West East Midlands East West Midlands United Kingdom South East London Significant real income erosions continue across the UK Regional Trends Annual percentage declines in household discretionary incomes remain severe over Q as a whole Household purchasing power is continuing to decline year on year across the UK, with a worse situation for many regions and countries in Q than in Q3. Regional income trackers, annual change to quarter indicated 5% 0% -5% Northern Ireland continues to suffer the harshest declines in household finances because the cost of essentials makes up a greater average proportion of family budgets. However, improvements in the unemployment rate for the country have helped prevent real income erosions from being greater than they currently are. -10% -15% -20% London fared relatively well over the year to Q Essential spending makes up a smaller proportion of household incomes, while the unemployment rate dropped marginally by 0.1 percentage points in the quarter to November Q Q4 11 Centre for Economics and Business Research 2012

13 Northern Ireland Yorkshire & Humber Wales North East Scotland North West West Midlands East Midlands South West East UK South East London Falling income trackers throughout the UK highlight continued squeeze on households Regional Trends Wide disparity remains, as the gap between the highest and lowest income trackers widens The highest Asda Income Tracker the one for London showed 274 a week of discretionary income in Q This is nearly four times higher than that for Northern Ireland, where weekly spending power was Regional income trackers, per week This gap, where Northern Ireland s income tracker is only 26.4 per cent of London s, has widened over the past year from 30.8 per cent in Q This highlights the difference in economic challenges being facing families across the UK The South East and the East of England continue to have the next highest weekly discretionary incomes, with income trackers of 193 and 149 a week respectively Q Q4 12 Centre for Economics and Business Research 2012

14 North East London North West East Yorkshire & Humber Northern Ireland Scotland Wales UK South East East Midlands South West West Midlands Wage growth remains weak across UK and notably below the inflation rate Regional Trends All regions have gross income growth under 3.0 per cent well beneath the headline inflation rate of 4.2 per cent Gross income growth in the West Midlands was encouragingly strong in Q4 2011, at 2.7 per cent. This positive news is driven in part by labour market improvements in the region the unemployment rate dropped by a full 0.6 percentage points over the past year. 3.5% 3.0% 2.5% 2.0% 1.5% Regional gross income, annual change to quarter At the other end of the scale, gross income growth remains weak in the North East and North West. Rapidly deteriorating employment conditions in these regions are holding back improvements in household finances. The unemployment rate rose significantly over the past twelve months, by 2.3 and 1.2 percentage points respectively the largest increases of any region. 1.0% 0.5% 0.0% However, with gross income growth in every region and country remaining below the pace of the rising cost of living, no notable gains are expected to real incomes for some time Q Q4 13 Centre for Economics and Business Research 2012

15 Data and Methodology Appendix Please find attached the methodology and the tabulated date. Asda produces a monthly income tracker report with a more comprehensive report every quarter. For further information please contact: Joanne Newbould PR Manager joanne.newbould@asda.co.uk Tel Centre for Economics and Business Research 2012

16 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Monthly Asda Income Tracker Figure 1: Asda income tracker and year on year change (excluding bonuses) Asda income tracker tables % 10% 5% 0% -5% -10% -15% Asda income tracker (LHS) Asda income tracker annual change (RHS) 15 Centre for Economics and Business Research 2012

17 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Monthly Asda Income Tracker Figure 2: Comparison of year on year change in Asda income tracker including and excluding bonuses Asda income tracker tables Asda income tracker including bonuses Asda income tracker excluding bonuses 16 Centre for Economics and Business Research 2012

18 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 January January January January February February February February February March March March March March April April April April April May May May May May June June June June June July July July July July August August August August August September September September September September October October October October October November November November November November December December December December December Centre for Economics and Business Research 2012

19 Quarterly ASDA Income Tracker Asda income tracker tables Table 1: Average UK household Income Tracker, per week, current prices, excluding bonuses Region Q Q Q Northern Ireland Yorkshire & Humber Wales North East Scotland North West West Midlands East Midlands South West East UK South East London Centre for Economics and Business Research 2012

20 Methodology Methodology We use official data to provide an up to date and accurate measure of spending power. From April 2010, the income tracker is based on updated official base data on family expenditure and income from the Office for National Statistics Family Spending 2009 survey; making it not directly comparable with previous versions but up to date as possible with the latest data. In the latest version of the income tracker, we have improved how we account for changes in unemployment using the latest official data on Claimant Count and Labour Force Survey unemployment. A full methodology is available on request. The Asda income tracker indicators are calculated from the following equations: Total household income minus taxes equals net income Net income minus basic spend equals Asda income tracker 19 Centre for Economics and Business Research 2012

21 Methodology Methodology These components are based on official statistics and Cebr calculations. Total household income for the United Kingdom is derived from the Family Spending Survey 2008 (released 2010). 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 of 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. The average amount of tax paid for 2006 is calculated using the latest version of the Family Spending Survey. This is updated on a monthly basis using National Accounts and Public Financial Accounts. We forecast one month forward using our macroeconomic model for the United Kingdom. 20 Centre for Economics and Business Research 2012

22 Methodology Methodology 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 subtracted from our net income figures to create our Asda income tracker indicator. Basic spend items are listed in the appendix. The Asda income tracker is the amount remaining after the average UK household has had taxes subtracted from income and bought their essential items, such as groceries, electricity, gas, transport costs and mortgage interest payments. The income tracker measures the amount left over to spend on leisure and recreation goods and services; these are listed in the appendix. 21 Centre for Economics and Business Research 2012

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 Rob Harbron and Charles Davis. 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, January Centre for Economics and Business Research 2012