Highest wage growth in ten years boosts the Income Tracker
The latest figures from the Asda Income Tracker reveal that:
· Regular pay rose at the fastest rate since mid-2008, boosting Income Tracker growth
· Family spending power is up 6.1% year-on-year – the fastest increase since February this year
· Unemployment figures are the lowest since 1974 – sitting at 3.8% in the 3 months to May
· Regular pay (excluding bonuses) has increased by 3.6% year-on-year – the highest rate since the 3 months to July 2008
· Job boom shows signs of slowing as the number of full time workers falls by 77,000 while part time worker numbers increase by 86,000
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 covered essential spending such as: groceries, electricity, gas, transport costs and mortgage payments or rent.
The full report can be found here.
YEAR ON YEAR CHANGE
Family spending power averaged £214 a week after another welcome boost in June. The Income Tracker saw a 6.1% year-on-year increase, with families enjoying an extra £12.32 a week in their pockets.
The rise was supported by regular pay growth which stood at 3.6% year-on-year in the 3 months to May – the highest rate since the recession.
Total household income, before taxes and essential spending are subtracted, stood at £812 per week.
Over the past year, income growth has accelerated significantly as employers bump up their wages to attract and retain talent. Average annual gross income growth stood at 2.6% in the second quarter of 2018, going up to 3.5% for the same period this year.
This, alongside unemployment remaining at 3.8% - the lowest rate since 1974 - is keeping the labour market strong.
However, there has been a drop in the number of people in full-time work as the figure fell by 77,000 over the quarter, offset by an 86,000 worker boost to part-time employment. This suggests firms are moderating their hiring intentions in the current climate.
FACTORS AFFECTING SPENDING POWER
Inflation, as measured by the Consumer Price Index, remained unchanged for June, sitting at 2.0%.
The cost of clothing and footwear fell by 0.4% year-on-year, marking the 10th consecutive month of negative growth. Still, comparing the monthly price change to that of the previous year, prices fell by a smaller amount, causing upwards pressure on the price index.
This was offset by the slowing rate of inflation for transport, housing & utilities, and recreation & culture.
Fuel price inflation fell to 0.7%, the lowest rate since February this year, providing welcome relief for family budgets.
HIGHER UTILITY PRICES SLOW THE INCOME TRACKER ACROSS MOST REGIONS
While gross incomes have seen healthy growth, across the UK Income Tracker growth has moderated slightly between the first and second quarter.
Only two regions, Northern Ireland and the South East, have seen an acceleration in family spending power growth over this period. A slowdown has been felt across the other regions, leading to a fall in the average UK-wide Income Tracker growth rate, from 6.1% in Q1 2019 to 5.8% in Q2.
Ofgem’s price cap rise in April saw a steep increase in the cost of gas and electricity, affecting millions of families across the country. This has had a knock on effect on the Income Tracker as the cost of essentials has risen.
The North East and the South West have seen a particular slowdown, with family spending power growth slowing by 1.7 percentage points between the first and second quarter of 2019.
However, the UK-wide average family spending power rose to £213 in the second quarter of 2019, with families in London enjoying the highest average discretionary income at £292 per week. London also saw the highest discretionary income rise in absolute terms at £16.20.
NORTHERN IRELAND CONTINUES ITS RUN OF STRONG INCOME TRACKER GROWTH
Northern Ireland extended its run of robust Income Tracker growth rates, showing an annual increase in family spending power of 8.4% in the second quarter, unchanged from Q1.
At a rate of 3.1%, unemployment remains well below the national average.
Meanwhile, the share of employees working in the public sector has fallen below 25% for the first time since comparable records began. This suggests an increasingly dynamic private-sector led economy in Northern Ireland.
SCOTTISH ECONOMY SHOWS RESILIENCE WITH GDP GROWTH OF 0.5% IN Q1
Scotland’s economy showed resilience in the first quarter of the year, posting GDP growth of 0.5%. The picture is somewhat distorted, however, by producers building up stockpiles ahead of a potentially disruptive Brexit.
Income Tracker growth in Scotland stood at 6.3% in Q2 2019, slightly below the 7.3% recorded in the first quarter. The Scottish rate of unemployment remained unchanged in the three months to May, standing at 3.3% and thereby below the national average.
At 3.5%, wage growth in Scotland remains just below the UK-wide rate.
Nina Skero, Director, Centre for Economics and Business Research (Cebr), said:
“The latest ASDA Income Tracker paints a healthy picture of family spending power, increasing 6.1% year-on-year in June, the third highest annual growth rate in three years. The Income Tracker has been boosted by a tight labour market which is supporting wage growth – regular pay is now rising at the fastest rate since the recession. Still, some households have seen higher essentials costs, led by higher electricity and gas prices, eat away at their discretionary income.”