Income Tracker reveals under-30s are spending twice as much on essentials

The latest figures from the Asda Income Tracker reveal that:

  • Millennials face the highest essential spending costs as a proportion of income, as housing and education costs rise
  • Yet 30 to 49 year olds have fastest growing gross income as generation gap starts to emerge
  • Overall family spending power was up £4.42 a weak year-on-year in August
  • Emerging labour market shortages are beginning to generate wage pressures with faster pay growth

According to the Tracker – powered by the Centre for Economics and Business Research – the under 30s spend 80% of their gross income on taxes and essential costs such as housing and education, compared to the 70% spent by the baby-boomer 65-74 year old age bracket.

The full income tracker report can be found here:

And it’s good news for Generation X-ers, as 30 to 49 year olds have seen the fastest growing gross income for 19 consecutive quarters (almost 5 years), growing 3.0% year-on-year.
Across the board, households of all age groups have seen positive spending power growth in the second quarter of 2018, with the overall tracker revealing average UK discretionary spending power of £203 a week in August 2018, up from £199 in August 2017.

Yet the generational spending differences begin to paint a more nuanced picture, say experts.

Kay Neufeld, Managing Economist, Cebr, said: “The squeeze on family incomes for all ages ended earlier this year. While 65 to 74 year old were the last to see a return to spending power, pressures on employment and the rising costs in education and housing are seeing the under 30s now face the biggest challenges on their spending power. This largely undermines the prevalent narrative about reckless spending by the under 30s in recent times.

“In contrast to this, the 30-49 year olds saw the fastest increase in the income tracker and have done so for the past five years, meaning that we are seeing a reshaping of generational spending power which we shall be monitoring with interest for the next Income Tracker.”

YEAR-ON-YEAR CHANGE

Last month, family spending power was up by £4.42 a week year-on-year in August – amounting to a 2.2% annual increase in average family spending power.

However, gains in spending power have declined gradually over the past six months, but remain fairly stable.

The latest labour market data show that the unemployment rate remained stable in the three months to July, at 4.0%.

The figures also reveal that emerging labour shortages are beginning to generate noticeable wage pressures, with year-on-year pay growth, including and excluding bonuses, increased 0.2 percentage points in the three months to July compared to the three months to June. Regular pay growth (excluding bonuses) now stands at 2.9% year-on-year.

The strong summer continued for retail, with sales volumes increasing by 3.3% year-on-year in August. This was primarily driven by strong growth in online and household goods sales, while clothing and footwear stores saw sales decline.

Meanwhile, inflation as measured by the Consumer Price Index rose from 2.5% in July to 2.7% in August, its highest rate since February 2018. The CPIH measure of inflation increased 0.1 percentage points to 2.4%.

Transport costs were again the largest single contributor to inflation, driven by high global oil prices. Within this, fuel for vehicles rose at an annual rate of 11.7%.

Recreational goods and services were the second highest contributor to inflation in August, with prices rising at their fastest since January 2010. Strong price rises for package holidays contributed to this.

Prices rose across all major categories in August, but the weakest inflation was in the cost of communication and clothing & footwear.

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 payments or rent.