The average family’s spending power fell by £9 per week in January, the largest fall on record and the second record breaking month in a row.

According to the Asda Income Tracker, the average family had £174 per week to spend in January, 4.7% down from £183 this time last year.

The continued decline in family spending power was due to the price of essential goods and services rising faster than net income growth.

The rise in inflation points towards the depreciation of sterling, rising global commodity prices and the VAT rise in January 2011.

Petrol price rises were also a contributing factor.

Charles Davis, managing economist at Cebr, which compiles the data, said: “With annual consumer price index inflation double the Bank of England’s target rate, while earnings growth remains modest, average households are seeing spending power sharply eroded.

“This trend is likely to continue into 2011, as inflation remains elevated and the labour market recovery lacks conviction.”

Andy Clarke, Asda chief executive, said: “The latest drop in household spending power reflects what we’re seeing in our stores - customers making each pound count. 

“We’re conscious that we’re now seeing year-on-year declines in disposable income that reinforce our responsibilities to shoppers - holding back inflation, keeping prices low, and being at our best in helping them deal with whatever the economy throws at them.”

Topics