Positive outlook as new economic data shows families have more money to spend
The latest figures from the Asda Income Tracker reveal that:
- Over the month of May spending power was £16.56 higher compared with the same month a year ago - equivalent to a 2.1% year-on-year increase.
- Fifth consecutive month of growth as rising wages and falling inflation provide boost for households, despite the negative impact of the continued increase in the price of fuel
- Inflation remains unchanged as UK households benefit from record high employment rates and the lowest unemployment since 1975
- All UK regions show quarter-on-quarter growth in wages, closing the gap on pace-setting London
The Asda income tracker is a measure of ‘discretionary income’, reflecting the amount of money 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 latest Income Tracker report can be found here:
Year on year change
During May 2018 average weekly spending power of UK households rose by £4.14 (£16.56 for the month) compared with the same month last year – equivalent to a 2.1% increase.
Figures released by Asda show that this, coupled with the recent slowdown in inflation as measured by the Consumer Price Index, brought some relief to UK households. Inflation stood at 2.4% in the year to May, unchanged from the previous month.
Price increases slowed in most categories compared to the previous, suggesting that consumers can enjoy the higher wage growth without having to pay more for their essential items.
Inflation for recreation and culture saw the biggest monthly fall, but prices for housing and utilities and furniture also increased at a slower rate compared to the previous month.
However, the largest and most significant upward contribution to inflation came from transport costs.
Oil prices have been steadily rising since the end of March, meaning prices at the pumps have increased by up to 10ppl.
In response, Asda have announced two price drops in fuel in successive weeks, cutting the price of petrol by 5ppl and dielsel by 3ppl. The full detail can be found here.
Positive outlook as gross income growth accelerates
Between Q2 2017 and Q2 2018, gross income growth accelerated across the majority of the regions with Northern Ireland seeing growth doubling for gross income.
Across the UK, gross income growth increased from 1.7% in Q2 2017 to 2.4% in the same quarter of this year, reflecting the positive gains in earnings over the past 12 months.
The continued improvements of people in employment lead to an increasingly tight labour market and rising wages in May 2018.
The biggest jump between the two years can be observed in Northern Ireland, which leads the table in terms of income growth. At 3.9%, income growth stands 2.1 percentage points higher than over second quarter of 2017.
The East of England and the West Midlands also reported strong growth of 1.6 and 1.5 percentage points, respectively.
With most regions experiencing accelerating income growth, discretionary spending power is also on an upwards trend.
Yorkshire & the Humber, Wales and the South West have all experienced positive spending power growth in the second quarter after a year of falls in the Income Tracker.
London is the only region that has seen discretionary income growth decline in the second quarter compared to the first three months of the year as income gains have moderated.
Northern Ireland and the North East lead the table in terms of strongest increases in the Income Tracker in Q2 2018.
Average household discretionary spending power has increased slightly in all regions except the East Midlands between Q2 2017 and Q2 2018.
The East Midlands is the last region where we see the Income Tracker still in decline – with with its large manufacturing workforce having seen more modest earnings growth compared to other regions.
The biggest gain in pound terms is measured in Northern Ireland, where discretionary incomes increased from £98 per week to £107 per week.
London and the East of England follow with gains of £7 and £6, respectively in the year to Q2 2018. The two regions also take the top spots with regards to overall family spending power.
Kay Neufeld, Manbaging Economist, Cebr, said:
“UK households continue to benefit from the combination of moderating inflation and robust wage growth. After a tough year in 2017, our data show the fifth consecutive increase in the ASDA Income Tracker for 2018 in May.
“Low unemployment and record-high employment rates keep up the pressure on wage growth. At the same time, inflationary trends subside across most categories, though rising oil prices are a source of worry for motorists.
"Looking at the regional picture, we find that all regions except the West Midlands experienced annual growth in discretionary incomes over the second quarter."