5B9F6EF9d01

8/6/2019 5B9F6EF9d01

1/19

Asda IncomeTrackerReport: April 2011

Released: May 2011

Centre for Economics andBusiness Research ltd

Unit 1, 4 Bath Street, London

EC1V 9DX

t 020 7324 2850

f 020 7324 2855

w www.cebr.com

m a k i n g b u s i n e s s s e n s e

8/6/2019 5B9F6EF9d01

2/19

Contents

Introduction 02Headlines 03Asda Income Tracker model 04

Dashboard 05Income Tracker trends 06Cost of living 08

Net income 10Appendix 12Asda Income Tracker tables 14Methodology 15

Disclaimer 18

Asda Income Tracker

8/6/2019 5B9F6EF9d01

3/19

Spending power has seen another significantfall this month which is adding further

pressure on family budgets.

We know that shoppers are being savvy and

managing their finances by scratch-cooking

and buying what they need, when they need

it."

Introduction

Centre for Economics and Business Research 20112

Asda Income Tracker

Andy Clarke Asda president and CEO

8/6/2019 5B9F6EF9d01

4/19

Headlines Asda Income TrackerThe average UK household had 167 a week of discretionary income in April

2011, 7.1 per cent lower than a year earlier. The 13 a week fall compared tothe same month a year earlier is the largest decline on record.

Over the three months to March 2011 average earnings (excluding bonuses)rose by 2.1 per cent year-on-year. This is 1.9 percentage points lower thanthan the long-run average earnings growth of 4.0 per cent seen prior to therecession.

Inflation on the consumer price index was at 4.5 per cent in April sharply upfrom 4.0 per cent in March - the highest rate of inflation since September 2008and over double average earnings growth at present. This implies significantfalls in household real incomes are taking place.

Headlines

While the Asda Income Tracker showed signs of stabilising in March, asfalling food prices pushed down inflation, subsequent rises in transport andutilities prices have pushed the cost of living back upwards

This is being compounded by lacklustre annual earnings growth, which iscurrently running at less than half the rate of inflation. Households are undersignificant financial duress at the moment and it looks like high inflation will

keep up the squeeze throughout the year.

Charles Davis Managing Economist, Cebr

Asda family

spending

power down

7.1 per cent

in April

year-on-year

13 a

week less

3 Centre for Economics and Business Research 2011

8/6/2019 5B9F6EF9d01

5/19

Constructing the Asda Income Tracker

Total householdincome

726 per week

e.g.. wages, investment income,pensions, social security, selfemployment earnings

e.g.. national insurancecontributions, income tax

i.e. take home pay

eg. holidays, cinema, theatre, eating out,toys, sports, savings, jewellery, nationallottery and other gambling payments,computer software and games

e.g.. food, clothing, housing costs,bills, transport, communicationcosts, health, childrens schooling,house maintenance and repair

i.e. take home pay

Taxes134 per week

=-

Net income

592 per week

Cost of living425 per week

=-

Net income

592 per week

Average familyspending power

167 per week


8/6/2019 5B9F6EF9d01

6/19

Asda Income Tracker Dashboard: Apr

Annual percentage changeIndicator

2.1% (excl. bonuses)Earnings Growth* (Mar)

7.7%Unemployment* (Mar)

Latest trend

2.1%Net income

4.1%Mortgage costs

4.4%Food

12.7%Petrol

4.4%Utilities

6.3%Cost of living

-7.1%Family spending power

KEY IMPROVEMENT NO SIGNIFICANT CHANGE DETERIORATION

Dashboard

5

* three months to month stated

Please note that the dashboard should be read in conjunction with the main body of the report


8/6/2019 5B9F6EF9d01

7/19

After stabilising in March spending

decline steepens in AprilThe Asda Income Tracker was 13lower in April 2011 than in April 2010 -the largest annual fall on record.

The 7.1 per cent year-on-year decline is also the

largest since records began in January 2007.

Gross incomes (excluding bonuses) grew at anannual rate of 2.1 per cent in April, slightly down

from the previous month and about half the typicalannual growth seen prior to the 2009 recession.

The annual rise in the cost of essential goods andservices was 6.3 per cent in April 2011 the highestannual growth since September 2008.

When the impact of bonus payments is included,family spending power decreased by 14 over theyear to April, a fall of 6.7 per cent.

Trends

Year-on-year change in Asda income tracker

6

-15

-10

-5

0

5

10

15

20

25

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10

Apr-11


8/6/2019 5B9F6EF9d01

8/19

The Asda Income Tracker was 13lower in April 2011 than in April 2010 -the largest annual fall on record.

Consumer price inflation rose sharply in April andthe Bank of England has warned that inflation couldincrease still further over the coming months predominantly due to soaring utilities bills.

At the same time, the latest labour market data,while showing a fall in unemployment, also showsearnings growth running far below inflation andtypical pre-recession levels.

So while the UK economy continues to graduallyrecover, consumers remain under significant

financial duress as the growth in their incomes failsto keep pace with the rising cost of living.

Much uncertainty hangs over when the Bank ofEngland will raise its base interest rate. While it maywish to raise rates as a response to high inflation,this could push up mortgage interest payments formany households an additional financial squeeze.

Trends

Year-on-year change in Asda income tracker

After stabilising in March spending

7

decline steepens in April


-15

-10

-5

0

5

10

15

20

25

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10

Apr-11

8/6/2019 5B9F6EF9d01

9/19

Prices growing twice as fast as incomes

Annual CPI inflation rose to 4.5 per centin April, up from 4.0 per cent in March

The rate of annual CPI inflation is more thandouble the Bank of Englands target rate of 2.0 percent and over double gross income growth atpresent.

On the wider retail price index which includeshousing costs inflation is even higher at 5.2 per

cent in April, though fell from 5.3 per cent in March.

The Bank of England continues to face criticism forbeing too complacent over the issue of inflation.Despite ongoing pressure, the Bank has yet to raiseinterest rates in response to high price growth.

In its May Inflation Report, the Bank warned thatCPI inflation could reach 5.0 per cent later this year,mainly due to rising utilities bills. However, the Bankexpects inflation to fall back towards target from nextyear, as the effect of the VAT rise on inflation fallsout of the comparison and global commodity prices

show signs of stabilising.

Cost of living

8

0%

2%

4%

6%

8%

10%

12%

Recreation&

culture

Clothingandfootw

ear

Communica

tion

Mortgageinterestpayments

Housing,fuel&po

wer

Fo

od&

non-alcoholicdrinks

Educa

tion

Essentialspending

Alcohol&

toba

cco

Trans

port

Inflation of selected goods, annual change to April 2011


8/6/2019 5B9F6EF9d01

10/19

The main factors putting pressure onfamily spending power in April were:

Transport costs continued to be the largest

contributor to the headline rate of inflation in April,contributing 1.5 percentage points to the 4.5 per centheadline rate.

Transport costs are now 9.6 per cent higher than ayear ago a result of soaring petrol prices andhigher train fares. According to data from the

Automobile Association, unleaded petrol prices aresome 12.7 per cent higher in April 2011 than in thesame month a year ago.

Housing and household services contributed 0.6percentage points to the annual rate of inflation,largely due to rising domestic heating costs and

rents.

Alcoholic beverage and tobacco prices rose by 8.9per cent over the year to April 2011, largely due toincreases in excise duty for these goods which cameinto effect last month.

Cost of living

Transport and heating costs push up

9

inflation


0%

2%

4%

6%

8%

10%

12%

Recreation&

culture

Clothingandfootwear

Communica

tion

Mortgageinterestpayments

Housing,fuel&power

Fo

od&

non-alcoholicdrinks

Educa

tion

Essentialspending

Alcohol&

toba

cco

Trans

port

Inflation of selected goods, annual change to April 2011

8/6/2019 5B9F6EF9d01

11/19

Unemployment falls slightly butearnings growth languishes at pre-recession levels.

The latest labour market data show some

improvement in the UK labour market in recentmonths. The broad International Labour Organization(ILO) measure of the unemployment rate fell to 7.7per cent over the three months to March, down 0.1percentage points on the previous quarter.

However, this still leaves unemployment notablyhigher than pre-recession levels and the claimantcount rose by 12,400 between March and April.

Furthermore, average weekly earnings growthcontinues to trail both far behind the annual rate ofconsumer price inflation at present and behindtypical pre-recession levels of growth in income.

For the three months to March 2011, annual growthin regular pay (excluding bonuses) was only 2.1 percent. This compares with average growth of 4.0 per

cent for the years 2001 to 2008 inclusive.

Net income

Earnings growth languishes below pre-

recession levels

0

1

2

3

4

5

6

7

8

9

2005

Jan

2005

Jul

2006

Jan

2006

Jul

2007

Jan

2007

Jul

2008

Jan

2008

Jul

2009

Jan

2009

Jul

2010

Jan

2010

Jul

2011

Jan

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

ILO unemployment rate Earnings growth

UK unemployment rate (LHS), per cent and annual growthin regular pay (RHS), per cent


8/6/2019 5B9F6EF9d01

12/19

Data and Methodology

Please find attached the methodology and the tabulated date.Asda produces a monthly income tracker report with a morecomprehensive report every quarter.

For further information please contact:

Joanne NewbouldPR Manager

Email [email protected] 0113 826 3536

Appendix

mailto:[email protected]:[email protected]

8/6/2019 5B9F6EF9d01

13/19

Monthly Asda income trackerAsda income tracker tables

Asda income tracker (LHS) Asda income tracker annual change (RHS)

Figure 1: Asda income tracker and year on year change (excluding bonuses)

12

150

155

160

165

170

175

180

185

190

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11 -10%

-5%

0%

5%

10%

15%


8/6/2019 5B9F6EF9d01

14/19

-14

-12

-10

-8

-6

-4-2

0

2

4

6

8

10

12

14

16

18

20

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Monthly Asda income trackerFigure 2: Comparison of year on year change in Asda income tracker

including and excluding bonuses

Asda income tracker including bonuses Asda income tracker excluding bonuses


8/6/2019 5B9F6EF9d01

15/19

Monthly Asda Income Tracker

Month

January 2007

Income tracker Month Income tracker

170

Month Income tracker

184

Month Income tracker

163 182

February 2007 162 169 182 181

March 2007 161 170 184 182

April 2007 162 170 184 180

May 2007 162 169 183 179

June 2007 161 166 182 175

July 2007 166 165 183 177

August 2007 165 162 180 176

September 2007 166 161 181 178

October 2007 166 162 180 177

November 2007 166 166 180

175 180

January 2008

February 2008

March 2008

April 2008

May 2008

June 2008

July 2008

August 2008

September 2008

October 2008

November 2008

December 2008

February 2009

March 2009

April 2009

May 2009

June 2009

July 2009

August 2009

September 2009

October 2009

November 2009

December 2009

January 2009

Table 1: Average UK household Income Tracker, per week, current prices, excluding bonuses

Asda income tracker tables

176

December 2007 165 172

January 2010

February 2010

March 2010

April 2010

May 2010

June 2010

July 2010

August 2010

September 2010

October 2010

November 2010

December 2010


Income trackerMonth

174January 2011

February 2011 171

March 2011 172

April 2011 167

8/6/2019 5B9F6EF9d01

16/19

Methodology

We use official data to provide an up to date and accurate measure of spendingpower. From April 2010, the income tracker is based on updated official basedata on family expenditure and income from the Office for National StatisticsFamily Spending 2009 survey; making it not directly comparable with previousversions 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 inunemployment using the latest official data on Claimant Count and LabourForce Survey unemployment. A full methodology is available on request. TheAsda income tracker indicators are calculated from the following equations:

Methodology

Total household income minus taxesequals net income

Net income minus basic spendequals Asda income tracker


8/6/2019 5B9F6EF9d01

17/19

Methodology

These components are based on officialstatistics and cebr calculations.

Total household incomefor the United Kingdom is derived from the Family

Spending Survey 2008 (released 2010). This is updated on a monthly basisusing official statistics on average earnings, unemployment, social securitypayments, interest rates and pension income. Earnings data from the Office ofNational Statistics that is released in the month of the report refers to theprevious month. We forecast earnings data for the month of the report.

Taxesare subtracted from total household income to estimate the actualamount that can be spent on goods and services, i.e. net income. The averageamount of tax paid for 2006 is calculated using the latest version of the FamilySpending Survey. This is updated on a monthly basis using National Accounts

and Public Financial Accounts. We forecast one month forward using ourmacroeconomic model for the United Kingdom.

Methodology


8/6/2019 5B9F6EF9d01

18/19

Methodology

Net incomeis calculated by deducting our tax estimate from our total

household income estimate.

Basic spend (cost of living)figures are subtracted from our net income figuresto create our Asda income tracker indicator. Basic spend items are listed in theappendix.

The Asda income trackeris the amount remaining after the average UKhousehold has had taxes subtracted from income and bought their essentialitems, such as groceries, electricity, gas, transport costs and mortgage interestpayments. The income tracker measures the amount left over to spend on

leisure and recreation goods and services; these are listed in the appendix.

These components are based on officialstatistics and cebr calculations.

Methodology


8/6/2019 5B9F6EF9d01

19/19

Disclaimer

This report has been produced by the Centre for Economics and

Business Research (Cebr), an independent economics and businessresearch consultancy established in 1993 providing forecasts andadvice to City institutions, government departments, local authoritiesand numerous blue chip companies throughout Europe. The main

contributors to this report are economists Scott Corfe, Charles Davisand Douglas McWilliams.

Whilst every effort has been made to ensure the accuracy of thematerial in this report, the authors and Cebr will not be liable for any

loss or damages incurred through the use of this report.London, March 2011

Disclaimer


5B9F6EF9d01

Documents

Transcript of 5B9F6EF9d01