Weekly spending power for the average family fell £8 in December, according to the latest Asda Income Tracker published today.
It is the 12th consecutive month that spending power has fallen, and last month’s drop represents the biggest decline since the monthly study was launched in March 2008.
Based on the amount an average UK household has to spend once taxes and the cost of basic items is subtracted from income, spending power totalled £172 per week in December falling primarily because of the disparity between national inflation and rise in wages.
Charles Davis, the economist at Cebr who compiles the report for Asda, said: “As this month’s Asda income tracker shows 2010 was a tough year for the consumer.
“The elevated level of inflation in 2010 was mainly driven by the VAT increase in January 2010 and external factors driving up commodity prices: the return to economic growth across the globe pushing up demand and floods and droughts in China, Pakistan and Russia affecting supply.
“The sluggish wage growth is a result of the slack in the labour market that built up during the recession.”
Rising commodity prices are set to continue with the Governor of The Bank of England Mervyn King predicting earlier this week that inflation is likely to stay at around four to five per cent this year.
Petrol has been the biggest downward pressure on consumers over the last quarter with prices up 12.7 per cent in December 2010 year-on-year, compared with 9.6 per cent in November.
Andy Clarke, Asda president and CEO, commented: “Last year disposable incomes dropped every single month, and 2011 is shaping up to be just as challenging.
“The cost of living continues to rise at a faster rate than people’s earnings, putting a further squeeze on family finances.
“With government measures to reduce the deficit beginning to bite, it’s unlikely there’ll be any let up soon.”