- Drop in NI family spending power growth from over 8.1% in Q2 to 2.8% in Q3 2018
- Rise in unemployment rate from 3.5% in three months to June to 4.3% in the three months to August weighing on families’ incomes
- NI remains at the bottom of the Income Tracker League table with a discretionary weekly income of £106
The latest data from Asda’s Income Tracker (September 2018) has revealed a noticeable drop in family spending power growth from 8.1% in Q2 to 2.8% in Q3 2018 in Northern Ireland. The sharp surge in the unemployment rate over this time, from 3.5% in Q1 to 4.3% in the third quarter is the main driver behind the decrease.
This marks the end of an impressive growth spurt for the NI Income Tracker during which the NI labour market outperformed the UK average in every month since July 2017. The NI unemployment rate in the three months to August is now higher than the national average of 4%.
With UK-wide family spending power sitting at £205 per week for Q3 2018, Northern Ireland remains at the bottom of the regional Income Tracker league table with a discretionary weekly income of £106 to spend after taxes are deducted and everyday essentials such as mortgages, transport costs and utility bills are paid – a small £3 increase from Q3 2017.
However, in spite of this, decent economic growth in the second quarter – fuelled by the services sector – as reflected by a 2.9% increase for gross income growth, gives reason to expect that NI family spending power will remain in the positive.
Positive outlook for UK as Asda Income Tracker rises at the fastest pace for two years – as September wage growth highest in a decade
UK family spending power was up by £7.45 a week year-on-year in September, amounting to a 3.8% annual increase – marking the fastest annual increase in the Income Tracker since December 2016.
The latest official labour market data show that the national rate of unemployment remained unchanged at 4.0% in the three months to August while regular pay growth increased to 3.1% over the same period.
This means that consumers are benefitting from the fastest nominal pay growth since the end of 2008.
The sustained low rate of unemployment and the reduction of slack in the labour market have been exerting upwards pressure on wages for some months now.
A downtick in inflation in the latest reading further helped families to keep the cost of essential spending down.
Inflation as measured by the Consumer Price Index fell to 2.4% in September, down from 2.7% in the previous month.
Lower prices for clothing and footwear were one of the main contributors to the fall in inflation last month. Prices for recreation and culture, which includes items such as video games or package holidays, also exerted downward pressure on the inflation rate this month.
Transport costs remain the single largest contributor to inflation with fuel costs rising by 1.3% on the month. However, the contribution of transport to headline inflation was smaller this September compared to the same month last year, explaining some of the fall in the headline index between August and September.
Electricity and gas prices both increased in September adding to the cost of essential spending for consumers.
Kay Neufeld, Managing Economist, Cebr, said:
“Households in Northern Ireland have enjoyed above-average increases in discretionary incomes for the first half of the year, providing a much needed boost to their spending power. The latest ASDA Income Tracker data shows, however, that this period of impressive growth has come to an end in the third quarter with the growth falling back to 2.8%, below the national average. This will make it harder for households in Northern Ireland to close the gap with the North East, which ranks top in the UK for family spending power growth in this data and has an average household discretionary income of £140 per week – £34 higher than NI.
“Unemployment has risen sharply over the past months, albeit from a low base, weighing on families’ income growth. At the same time, increases in global oil prices put pressure on families’ budgets, which is particularly felt across car-reliant Northern Ireland.”