5B9F6EF9d01
Transcript of 5B9F6EF9d01
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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
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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
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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
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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
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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
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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
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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
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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
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-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
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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
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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
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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
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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
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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
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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)
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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%
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-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
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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
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Income trackerMonth
174January 2011
February 2011 171
March 2011 172
April 2011 167
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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
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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
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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
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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
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