Income Tracker growth is boosted by the lowest rate of inflation in two years – with savings boom on the way for under-30s

The latest figures from the Asda Income Tracker reveal that:

  • Family spending power was £11.25 a week higher in January 2019 than a year before – an annual increase of 5.6%
  • Income Tracker growth is boosted by the lowest rate of inflation in two years at 1.8%
  • 30 to 49 year olds see the strongest income growth among all age groups
  • Under-30s see the fastest increase in discretionary income – up 5.9% from last year

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 show that during January 2019, average weekly spending power of UK households rose by £11.25 a week compared with the same month last year – the equivalent to a 5.6% increase, meaning that the average family has £211 of discretionary income to spend per week.

Despite slowing GDP growth and ongoing business uncertainty, the UK labour market continues to boast high employment figures and a low unemployment rate, which has remained unchanged at 4.0%.

Nominal annual wage growth (excluding bonuses) accelerated slightly to 3.4%, while inflation has continued to slow, keeping the cost of essential spending in check.

Inflation was a main factor affecting family costs in January. At 1.8%, inflation is at its lowest in two years. This was mainly driven by a decrease in price growth for electricity, gas and other fuels, where inflation fell from 8.1% in December to 1.4% in January due to falling oil prices. The inflation for vehicle fuel prices also fell to 0.7%, which is the lowest it has been in 10 months.

Clothing and footwear also saw a fall in prices in January as stores offered large discounts in order to entice shoppers after the holiday period. The rate of deflation fell to -1.3%, down from -0.9% in December.

However, these effects were partially offset by higher inflation for other areas of discretionary spend, such as recreation, culture and household furniture and equipment.

GROWTH IN FAMILY SPENDING POWER ACCELERATES FURTHER FOR ALL AGE GROUPS

Incomes continue to grow at a healthy pace across all age groups. Gross incomes have increased 3.3% on average, and all age groups have seen a further acceleration of discretionary income in January compared to November last year. However, the cost of essential spending has increased by 2.3% among working age households.

Gross income growth for households under 30 remains above 3.0% for a fifth consecutive month but, due to their lower income levels, they do pay more in relative terms - on average, 80p out of every £1 earned goes towards taxes or essential spending. However, this age group has also experienced the strongest growth in discretionary incomes in the year to January, at 5.9%.

30-49 year olds see the strongest gross income growth of all age groups, with an average of 3.4% compared to the population-wide average of 3.3%. However, they continue to be the ‘squeezed middle’ group, paying the most in absolute terms on essential spending and tax.

Households of 50-64 year olds continue to have the highest family spending power, at £284 per week. Due to increasing labour market participation of older generations and the pension triple lock, the income of those over 65 has also increased markedly in January.

However, whilst those aged 75 or over are spending just 63% of their income on taxes or essentials, people aged between 65 and 74 are spending the second highest share on these essentials, at 69% of their income.

At 4.0%, households in pension age have also seen robust increases in discretionary incomes. While income gains are more moderate for older age groups, low inflation helps pensioners disproportionately as their relative spending on essentials is higher.

Kay Neufeld, Managing Economist, Cebr, said: “The latest Asda Income Tracker provides an relatively optimistic outlook for the coming months with the continued decline of inflation and all age groups having seen a further acceleration in Income Tracker growth rates in January compared to November 2018 when we last presented this split.

"The UK labour market is showing positive developments in terms of employment gains, coupled with a low unemployment rate.

“However, consumers are still clearly cautious and refrain from making big-ticket purchases as shown in subdued growth rates for retail sales. High household debt levels and political uncertainty will likely continue to weigh on consumer sentiment in the next few months.

“We might also be about to see a ‘savings boom’ as the under-30s, who typically are recognised for saving the lowest amount of money among all generations, see the fastest increase in discretionary incomes at 5.9%. Having more discretionary spending left over after deducting the cost of essentials means that houoseholds can put more money aside to save towards a deposits, This will be hugely welcomed amongst those in ‘generation rent’ looking to get on the housing ladder.”