Families were £13 a week worse off than they were a year ago in April as annual earnings grow at less than half the rate of inflation.
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According to Asda’s Income Tracker the average family had £167 per week to spend, down 7.1% year-on-year and falling from £172 in March.
The data indicates that while the UK economy continues to gradually recover, consumers remain under significant financial pressure as growth in income fails to keep pace with the rising cost of living.
Consumer price inflation rose sharply from 4% to 4.5% in April and the Bank of England has warned that inflation could increase further still over the coming months on the back of soaring utility bills.
Whilst the latest labour market data is showing a fall in unemployment, it also shows earnings growth running far below inflation and typical pre-recession levels.
Transport costs continued to be the largest contributor to the headline rate of inflation in April. The cost of getting around is now 9.6% higher than a year ago – a result of soaring petrol prices and higher train fares.
Asda president and chief executive Andy Clarke said: “Spending power has seen another significant fall this month which is adding further pressure on family budgets. We know that shoppers are being savvy and managing their finances by scratch-cooking and buying what they need, when they need it.”
CEBR managing economist Charles Davis said: “While the Asda Income Tracker showed signs of stabilising in March, as falling food prices pushed down inflation, subsequent rises in transport and utilities prices have pushed the cost of living back upwards. This is being compounded by lacklustre annual earnings growth.
“Households are under significant financial duress at the moment and it looks like high inflation will keep up the squeeze throughout the year.”