Asda Income Tracker: average family's spending power suffered largest fall on record in December

Spending power fell in annual terms every month in 2010. Also, when the impact of bonus payments is included, family spending power decreased by £9 over the year to December, a fall of 4.5%.

The average family had £172 per week to spend in December, down from £180 this time last year and for 2010 as a whole average weekly household disposable income was £4 below the average level for 2009 at £178, a 2.2% decrease.

The main driver of the downward trend is the disparity between consumer price inflation and sluggish earnings growth. Gross incomes grew by 2.3% in December year-on-year, down from 2.6% in November, while the cost of essential goods and services was 3.9% higher in December 2010 than in December 2009.

There was a sharp 3.7% rise in the consumer price index in December, compared to 3.3% in November. The increase between the two months was the highest on record. There was also a notable increase in inflation.

The price of petrol was a key contributor to the rate of inflation.

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 cost of essential goods and services rose at a faster pace than average wages.

“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.

“The picture for 2011 looks set to be equally tough for the consumer. The VAT increase in January 2011 will keep inflation elevated this year, while public sector cuts will start in earnest. As such wage growth will remain modest. This is likely to result in lower levels of disposable income in real terms for families in 2011 compared to 2010.”

Andy Clarke, Asda chief executive said: “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.

“It’s our job though to work with our suppliers to reduce costs and keep our prices as low as possible. The £8 a week drop in the Income Tracker is in part responsible for the huge uplift we’ve seen in people taking advantage of the Asda Price Guarantee.”

“Since the turn of the year we’ve seen a seven fold increase in shoppers comparing the price of their groceries online. Our guarantee to be at least 10pc cheaper than other supermarkets or we will refund the difference means we’re helping British families out when they need it most.”