Asda Income Tracker rises at the fastest pace for two years – as September wage growth highest in a decade
The latest figures from the Asda Income Tracker reveal that:
- Family spending power was up by £7.45 year-on-year last month – an annual increase of 3.8%
- Strong labour market boosts income growth across most regions, as inflation falls on the back of cheaper clothes and recreational goods
- UK families see the fastest pay growth since 2008
- North East leads with fastest family spending power growth in Q3 2018
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.
Family spending power was up by £7.45 a week year-on-year in September, amounting to a 3.8% annual increase – marking the fastest annual increase in the Income Tracker since December 2016.
The latest official labour market data show that the rate of unemployment remained unchanged at 4.0% in the three months to August while regular pay growth increased to 3.1% over the same period
This means that consumers are benefitting from the fastest nominal pay growth since the end of 2008.
The sustained low rate of unemployment and the reduction of slack in the labour market have been exerting upwards pressure on wages for some months now.
A downtick in inflation in the latest reading further helped families to keep the cost of essential spending down.
Inflation as measured by the Consumer Price Index fell to 2.4% in September, down from 2.7% in the previous month.
Lower prices for clothing and footwear were one of the main contributors to the fall in inflation last month. Prices for recreation and culture, which includes items such as video games or package holidays, also exerted downward pressured on the inflation rate this month.
Transport cost remain the single largest contributor to inflation with fuel costs rising by 1.3% on the month. However, the contribution of transport to headline inflation was smaller this September compared to the same month last year, explaining some of the fall in the headline index between August and September.
Electricity and gas prices both increased in September adding to the cost of essential spending for consumers.
STRONG LABOUR MARKET BOOSTS INCOME GROWTH ACROSS MOST REGIONS
Average household discretionary spending power has increased in all regions between the third quarter of 2017 and the same period this year – and now stands at £205 in Q3 2018.
The strong performance of the ASDA Income Tracker is partly due to the acceleration in gross income growth across almost all regions and up 3.0% nationally in the year to Q3 2018.
The ongoing strong performance of the labour market with record high employment rates and the gradual uptick in wage growth over the past year has helped support income growth.
The highest annual income growth was recorded in the North East with 3.5% in Q3, followed by the East of England, the West Midlands and the South West. In London, income growth remained just below the UK average at 2.9%.
The South East was the only region to have seen a fall in income growth, from 2.5% in Q3 2017 to 2.3% in the same quarter this year.
Most regions have also seen an uptake in family spending power growth in Q3 2018 compared to the previous three-month period.
Again, the North East has experienced the fastest rate of growth, followed by the West Midlands and the East of England, mirroring closely the trends observed in gross incomes.
However, Northern Ireland has seen a noticeable drop in family spending power growth from over 8% in Q2 to 2.8% in Q3. The main driver behind this was a sharp uptick in the unemployment rate over this time, from 3.5% in Q1 2018 to 4.3% in the third quarter, weighing on families’ incomes.
The South East, London and the West Midlands have also seen a decline in family spending power growth compared to the previous quarter.
The largest annual increases in pound-terms have been recorded in the East of England (£8.02), London (£7.56) and the North East (£6.60).
In the case of the North East, the strong income gains - especially in the public sector - translated into healthy gains in the Income Tracker leading the region to close in on the West Midlands. Nevertheless, with just £140 of discretionary income per week, households in the North East have less than half the family spending power compared to those living in the capital.
Kay Neufeld, Manbaging Economist, Cebr, said: “The latest data makes for positive reading for households across the nation, with incomes rising faster than expected amidst the lowest levels of unemployment since the 1970s.
“The increase in household spending power that comes as a result will also provide a welcome boost ahead of the Golden Quarter, following months of low real wage growth and the decreased value in the pound that has pushed up the cost of imports.”