Income Tracker grows at the fastest rate in over two years - the largest increase in UK household spending power since August 2016

The latest figures from the Asda Income Tracker reveal that:

  • Family spending power was £11.37 a week higher in December 2018 than a year before – an annual increase of 5.8%
  • The UK has a new record high employment rate at 75.8%, supporting income growth across the country
  • Overall inflation has fallen to the lowest rate since January 2017, with fuel price inflation also down to its lowest level in nine months
  • Low unemployment helps Northern Ireland to record the fastest Income Tracker growth rate of any region in Q4, narrowing the family spending power gap to other regions

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.

The full report can be found here:

YEAR-ON-YEAR CHANGE

New figures released by Asda show that during December 2018, average weekly spending power of UK households rose by £11.37 a week compared with the same month last year – the equivalent to a 5.8% increase, meaning that the average family has £207 of discretionary income to spend per week.

In a further boost, the latest official labour market data shows that the rate of unemployment across the country fell further in the three months to November to stand at 4.0%.

Moreover, the employment rate – i.e. the share of people aged 16-64 in work – reached a new record high at 75.8%.

Nominal annual wage growth (excluding bonuses) remained stable at 3.3%, while inflation as measured by the Consumer Price Index fell from 2.3% in November to 2.1% in December, the lowest rate since January 2017.

The combination of a strong labour market and falling inflation is a boon to family spending power, leading to the first double digit pound-value increase in the Income Tracker in 28 months.

The biggest contributor to the decrease in inflation, compared to the previous month, was a fall in fuel price inflation, which stood at 3.4% in December – the lowest rate since April 2018 – down from the 8.9% measured in November. This is because between October 2018 and the end of the year, the price of Brent Crude fell significantly as concerns about oversupply and weaker demand from large oil consumers such as China depressed the cost of oil.

Clothing and footwear recorded negative inflation for a fourth consecutive month, also helping to bring down the overall rate of price growth.

REGIONS FEEL THE BENEFIT OF GROSS INCOME GROWTH ACCELERATION

Gross income growth has further accelerated over the year to Q4 2018 and exceeded the gains seen in Q4 2017 in almost all regions, jumping from 2.0% in Q4 2017 to 3.4% in Q4 2018 for the average UK household.

Scotland and Wales posted the fastest growth in gross incomes in the last quarter of 2018, up 3.5% year-on-year.

Northern Ireland is only one of the UK’s constituent regions and countries that has not seen an acceleration in gross income growth between the fourth quarters in 2017 and 2018.

However, with gains of 3.2% in the latest quarter its recent income growth stands above that of London and just slightly below the national average in Q4 2018.

The impact of gross income growth meant that average household discretionary spending power has increased across the regions, with UK-wide average family spending power rising to £206 per week in the last quarter of 2018.

Top of the Income Tracker growth charts, with weekly family spending power up by around £10 are Scotland, the East of England and London.

With a weekly discretionary income of £282, households in the capital continue to lead the way by a clear margin – with an additional £76 per week on average to spend compared to the national average.

Northern Ireland has experienced the largest relative increase in the fourth quarter at 5.5%, equivalent to an increase of £5.60 compared to Q4 2017.

Northern Irish households have on average £109 left over per week after paying for essential goods and services.

However, the gap between Northern Ireland and the next region, the North East, has narrowed from over 30% in Q2 and Q3 to 26%.

The main difference between the two regions remains the fact that the cost of essential spending is significantly lower in the North East than in Northern Ireland.

Kay Neufeld, Managing Economist, Cebr, said: “The latest Asda Income Tracker makes for very positive reading, providing much optimisim for the coming months with discretionary incomes up across the country, inflation ticking downwards, and a strong labour market.

“The combination of these three factors has led to the first double digit pound-value increase in the Income Tracker in 28 months.

“Despite this however, consumer sentiment remains fragile and households are fairly cautious about actually spending money due to the uncertainties that lie ahead – retail sales around the holidays in parituclar were disappointing. These are truly unprecedented times.”

ADDITIONAL FOCUS ON SCOTLAND AND NORTHERN IRELAND

North of the border, Scottish discretionary income growth continued its strong performance from the third quarter and rose by 4.8% in the year to Q4 2018, just above the national average of 4.7%.

This marks the highest growth rate in the Scottish Income Tracker since Q4 2016.

In line with the UK picture, unemployment continued to fall in Scotland in recent months, supporting income gains for households. According to the latest ONS data, unemployment fell below the 100,000 mark for the first time ever in the three months to November.

Meanwhile, Northern Ireland has concluded a year of substantial gains in the Income Tracker with an increase of 5.5% in Q4, higher than the 4.4% increase in family spending power measured in Q3.

After a brief increase in the unemployment rate above 4% in the summer, the rate of joblessness has fallen back to 3.5% in the three months to November, below the national average.

This is in line with a decent economic performance that saw output increase by 0.3% over the third quarter. However, the potential of a disruptive no-deal Brexit poses a clear downside risk for employment and incomes in the country.

-ENDS-

Gross income is defined as total household income from wages and salaries, self-emploment, investments, annuities, pensions and social securities.