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How does the Tracker provide powerful insights?
The Retail Economics-HyperJar Cost of Living Tracker contextualises monthly wage growth and inflation data by modelling household budgets and deducting staple and work-related expenses from disposable income to evaluate changes in purchasing power over time.
Our proprietary data enables us to delve deeply behind commonly reported headline data from official sources, by splitting inflation and earnings statistics by household affluence group based on income quintiles. This enables us to analyse, capture and accurately report on the impacts.
We do this by tracking monthly prices using a dynamic basket of goods to reflect evolving consumption habits by income quintile to give an inflation rate by household affluence. We also use Retail Economics data on the composition of jobs by income group to weight monthly earnings from official statistics.
Why the Tracker insights are important?
The insights are important to better understand the uneven impact of the cost of living crisis in the UK, particularly on consumer behaviour.
Due to the inflationary environment this year, we will likely see more recessionary behaviours being adopted – bargain hunting online, trading down to own brand labels and shopping around more for high street deals.
With a deeper understanding of the drivers, motivations and timings underpinning these behavioural shifts, more informed and effective strategies can be developed to tackle industry challenges.
The Cost of Living Tracker in context
With inflation forecast to rise steeply over 2022, the cost of living crisis in the UK is disproportionately impacting household spending power, especially for low income households. Poor households spend approximately two thirds of their income on staples such as food, energy bills and communication, compared to less than half for the most affluent.
This often results in increased stress and anxiety from unpaid credit card debt, mortgage repayments, loans and unexpected costs. Rising living expenses and essential bills are causing squeezed incomes amid the soaring energy price cap, rising interest rates, food inflation, higher taxes and National Insurance Contribution (NIC) changes. Also, the government’s ‘levelling up’ intentions are being undermined as rising essential expenditure erodes personal finances, widening inequality.
While middle and high income households are more resilient, the financial goals of poorer households will be tough to meet from higher levels of credit card debt and loan repayments amid spiralling prices.
Such price pressure risks a poverty trap and ultimately an economic shock, which the Cost of Living Tracker quantifies by comparing changes in discretionary income across different UK households, as well as over time through annual comparisons.
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