Average family spending power in the UK declined by a record £14 a week last month, according to new research.
Supermarket chain Asda’s latest Income Tracker report for May shows that the average family had just £165 to spend each week, a drop of eight per cent compared to the same period last year.
This is the steepest one-month drop Asda has recorded since it launched its first report in January 2007, which it claims is down to income rising at less than half the rate of inflation.
Andy Clarke, Asda President and CEO, said: “The true cost of living is now beginning to take its toll. Inflation is rising twice the rate of earnings, petrol prices are at a record high and utilities bills are only getting steeper - all adding up to a £14 a week hole in people’s pockets.
“The combined effect is creating a perfect storm for customers trying to make ends meet.”
The UK government’s official measurement of inflation remained at 4.5 per cent last month whereas earnings growth fell back to just two per cent for the three months to April 2011.
Whilst the cost of food products has been kept high by inflated commodity prices, transport prices are also weighing heavily on consumers with air fares up by 13.8 per cent compared to May 2010 and fuel and lubricants 13.7 per cent more expensive than last year.
Alcoholic beverages and tobacco prices grew by 9.8 per cent year-on-year during the month, which was the highest rise in all product categories and the fastest increase since March 1992.
Grocers are currently offering a multitude of discounts and promotions to prompt people to spend and a report on retail sales figures released by the Office for National Statistics last week noted the large number of high street retailers that have started their summer sales early.
Charles Davis, Managing Economist at the Centre for Economics and Business Research, commented: “The Asda Income Tracker shows discretionary income is under further pressure as annual earnings growth remains historically weak – under half the rate of inflation.
“The current picture of low wage increases and rapid inflation is likely to persist for the rest of the year, pointing to an extended squeeze on real disposable income.”