Family spending power boosted by surprise fall in inflation as The Asda Income Tracker was £14 a week higher than the year before

The latest figures from the Asda Income Tracker reveal that:
· The Asda Income Tracker was £14.00 a week higher in August 2019 than a year before
· Family spending power increased by 6.9% in the year to August 2019, faster than the 6.4% annual increase measured in the previous month
· Inflation, as measured by the Consumer Price Index, fell back to 1.7% in August, down from 2.1% in the previous month
· Gross income growth accelerated for most income groups between August 2018 and August 2019

The full report can be found here:

Year on Year Changes

Family spending power increased by 6.9% in the year to August 2019, which is the fastest growth rate since May 2016, as the income tracker rose by £14.00 year-on-year in August.

A sharp fall in inflation in August notably contributed to the boost in family spending power. The annual rate of price growth hovered near the Bank of England’s 2% target for most of the year before it fell surprisingly to 1.7% in August, down from 2.1% in the previous month. This is the lowest rate of inflation since December 2016.

Gross income growth accelerated for most income groups between August 2018 and August 2019, with only the lowest income group recording the same growth rate in both months.

The strong labor market and low unemployment rates continue to favor working age households, as employers incentivize new and current employees with higher rates of pay.

Inflation falls to a near three-year low easing pressure on households

There were several factors affecting family costs in August, with the prominent one being inflation.

Inflation, as measured by the Consumer Price Index, fell back to 1.7% in August, down from 2.1% in the previous month. This is the lowest rate of inflation since December 2016.

Rises in air fares were the largest upward contribution to inflation, driven by the holiday season. These were more than offset by downward contributions from recreational and cultural goods and services, with computer games exerting a particularly large drag on inflation.
Inflation for clothing and footwear turned negative again in August, after a short period of positive price growth in the previous month.

Shops competed for customers by slashing prices during end of summer sales, leading to a negative inflation rate of -0.9%.
Also, vehicle fuel inflation, which has trended down since April this year, also turned negative in August adding to the downward pressure on inflation.

Middle-income households benefit most from spending power increases in August

Nearly all households have seen strong growth in the Asda Income Tracker in August, with the biggest increase recorded for the third income quintile at 8.1%.

The second income quintile recorded the second-fastest growth rate at 7.1%, followed by the fourth quintile at 6.5% and the highest income group at 5.8%.

The cost of essential spending rose sharply in the second quarter of the year as energy providers increased prices for their most popular tariffs.

The lowest income group is still feeling the consequences of this, with their discretionary income down 2.6% on the year. The drop in inflation in August helped only slightly as it was largely driven by falls in the recreation and culture category.

Kay Daniel Neufeld, Head of Macroeconomics at Cebr said:

“In terms of spending power growth, August clearly is the highlight of the year so far. At 6.9%, the ASDA Income Tracker improved at the fastest rate in more than three years, adding further to the positive trajectory for family spending power that has emerged over the past months.

Households will welcome the current situation in which low unemployment and robust wage growth outweigh the modest inflationary pressures. The good times might not last much longer, however, as indicators of economic activity show a slowing UK economy.”