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Income Tracker November 2016

Five ASDA associates are tapping their pocket book area

Income Tracker shows petrol prices on the rise as inflation hits two year high

  • Petrol prices increased by 7.4% year on year in November, the highest price since July 2015
  • Inflation hit a two year high of 1.2%
  • Data shows under 30s have the lowest discretionary income compared to older generations
  • Disposable income grew 4.5% year-on-year in November, leaving families with £202 per week - third consecutive month of single digit growth

The latest Income Tracker from Asda has revealed that November saw the third consecutive month of single digit spending power growth for UK families, driven by higher prices at the pumps and increasing inflation.

The latest Income Tracker from Asda has revealed that November saw the third consecutive month of single digit spending power growth for UK families, driven by higher prices at the pumps and increasing inflation.

The cost of fuel was again one of the main contributors to the slowing with petrol hitting highest price since July 2015 last month, due to both the weakened pound and the global increase in fuel prices.

The recent upward trend seen in the consumer price index (CPI) continued into November. Inflation reached a two year high of 1.2% in November, up 0.3 percentage points compared to October. This has been attributed to clothing and fuel costs along with various service increases, including utilities, restaurant visits and hotel stays. However air fares bucked the trend, meaning that despite higher fuel prices, Christmas flights will be cheaper this year than in 2015.

The figures demonstrate that the positive progress that UK families have experienced over the last two years is now slowing as the downward trend of discretionary income is no longer being treated as a ‘blip’ by analysts.

Despite this slowdown in growth, families still enjoyed £202 of discretionary income in November, a rise of 4.5%, or £9, from the same time last year. Deflation in the food (-2%) and mortgage interest repayments (-6%) categories helped counter the inflated fuel prices, causing the cost of living to remain relatively flat.

This month’s report also looks at household gross income by age, which revealed that under 30s households had the least discretionary income out of any age group, well below the average at £154. On the flip side, households where the main earner is aged 50 to 64, have the highest weekly discretionary household income at £266.

In comparison to other age groups, the insight suggests that under 30s spend a relatively large share of their income on essentials - with a substantial amount being spent on education. Almost two thirds of their gross income goes towards essential spending, compared to 54% for 50 to 64 year olds and 53% for over 75s.

Elsewhere in the report, regular earnings continued to grow with November producing the highest rate of earnings growth in 2016. This shows that low unemployment is starting to put pressure on wages.

While earnings growth and unemployment show a labour market in good shape, there are early signs of a slowdown as the employment rate fell from its record high.

An Asda spokesperson said: “With the Christmas period upon us, it’s encouraging to see that families are still seeing growth in their spending power each month.

“However with inflation on the rise, fuel prices increasing and a decline in the employment rate this month, there are some warning signs to watch in the New Year. We will be monitoring these key areas closely and it will be interesting to see how the Income Tracker data changes as we move through 2017.”

Kay Neufeld, Economist, Cebr, said: “The decrease in spending power growth is more than a blip – after three months of falling growth rates there is no doubt that households’ discretionary income growth is on a downward trajectory. Rising prices for petrol and several services are eating into families’ budgets – prices for communication, health care but also for staying in hotels or eating in restaurants have all increased year-on-year in November.

“Households’ weekly spending power is still increasing, but this might not be the case in 2017. The greatest danger stems from rising inflation paired with a flailing labour market. While wage growth has accelerated in the latest readings, employment growth has slowed and the claimant count is rising – an economic slowdown in 2017 could put additional pressure on the labour market”