Asda’s income tracker gets another welcome boost as wage growth hits an 11-year high

· Family spending power was up by £12.05 a week year-on-year in July, a 5.9% annual increase
· Wage growth accelerated to 3.9% in the three months to June, the highest in 11 years
· The employment rate sits at a joint-record high of 76.1% for the same period, despite unemployment edging up slightly at 3.9%
· Faster pay growth was met with an inflation increase though, measuring 2.1% in July, up from 2.0% in the previous month
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

Family spending power has received another welcome year-on-year boost as families benefit from a strong labour market and generous pay rises, providing a positive outlook going into the second half of the year. The Asda Income Tracker was £12.05 a week higher in July 2019 than the previous year, only slightly below the 6.3% increase from June. Despite the slowdown, the growth rate was still the second highest since March this year.

Pay rises (excluding bonus) have really benefitted Asda’s Income Tracker, as wage growth accelerated to 3.9% in the three months to June, the highest rate in 11 years. Employers have increasingly been offering higher pay to attract and retain employees. Despite a small increase over the previous month, the unemployment rate remained very low at 3.9% in the three months to June. The employment rate returned to a joint-record high of 76.1% over the same period.

Record high employment rates and healthy pay rises across the board have benefited both the public and private sector, as private sector wages increased by 3.9% year-on-year, with the public sector not far behind at 3.8%.

Looking at wages by industry, workers in the construction sector saw the highest pay rises at 5.2% year-on-year in the three months to June followed by finance with a 4.5% pay increase.

FACTORS AFFECTING FAMILY COSTS

Despite the promising boost to the Income Tracker, inflation has had a slight impact on families as the Consumer Price Index has shown an increase in inflation to 2.1% in July, up from 2.0% in the previous month. This has impacted the cost of essential spending, which has continued to increase at a faster rate than the headline rate of inflation in July.

However, there some positive news in that compared to three months ago, the increase in the cost of essentials has slowed somewhat.
Inflation accelerated for recreation & culture, as well as for restaurants and hotels adding pressure to pockets around peak holiday season.
Prices for clothing and footwear stopped falling in July. The annual increase of 0.4% was the first rise since August 2018.

While higher prices for utilities will weigh on families’ budgets for some time, motorists have some reason to be optimistic. Fuel price inflation has fallen to the lowest level since August 2016, as it was only 0.2% more expensive to fill up the tank in July 2019 than it was in the same month last year.

Families will welcome falling electricity inflation, which for the first time in four months has fallen below 10%, standing at 9.6% in July. Prices for gas were 3.3% higher than in the same month last year, down from 4.4% in June.

INCOME TRACKER GROWTH ACCELERATES FOR WORKING-AGE HOUSEHOLDS

As employers boost wages to retain and attract new employees in a strong labour market, 50 – 64 year-olds have seen the highest weekly discretionary income at £289, while under 30s saw their discretionary incomes increase by 5.6% in the year to July 2019 compared to growth of 4.4% three months ago.

Similarly, 30 to 49 year-olds have seen their Income Tracker growth rate accelerate by 0.7 percentage points to 6.0% and 50 to 64 year-olds by 0.4 percentage points to 5.3%.

The only age group which didn’t see any uptick in Income Tracker growth was households aged 65-74 sitting at 3.2%, while those ages over 75 saw a decrease, from 3.0% in July to 2.7% this month. Incomes for pensioners have risen at decent rates this year, however the strong labour market has given working-age households an evener stronger boost.

Kay Neufeld, Head of Macroeconomics at Cebr said;
“As the economy has started to stutter over the past few months, the latest ASDA Income Tracker will be welcome news for UK households. So far, the slowdown in output growth has not yet affected the labour market and working-age households in particular benefit from employers competing for the best talent through higher wages. Meanwhile, inflation is under control and close to the Bank of England’s target of 2%. Looking ahead, the volatility of the pound could potentially lead to higher inflation in the coming months. Until then, households can expect to benefit from further increases in their spending power.