The average UK family was £7 a week better off in May compared to the same time last year, according to Asda.

The Asda income tracker showed a typical household had £164 a week of discretionary income in May, a 4.8 per cent increase compared to the same time last year.

Spending power rose by £7 a week, largely driven by the Bank of England reducing mortgage interest payments – now 45 per cent lower than a year earlier – and lower transport and electricity payments. The same time a year ago prices were rising as rocketing commodity and fuel prices pushed inflation to a 30-year high.

Asda president and chief executive Andy Bond said: “News that consumers are benefiting from cuts in mortgage payments is certainly reassuring and although we’re better off year on year, this by no means signals the end of difficult times for our customers.  Many of our customers are still worried about the uncertainties surrounding job security as there is no real sign of an up-turn in the labour market.”

Charles Davies, economist at Cebr, said: “Spending power has increased relative to a year earlier in both April and May.  However, this is not necessarily translating into increased spending on the high street – as shown by the 0.6 per cent month on month fall in retail sales in May.  This is due to increased levels of precautionary saving as consumer debt levels remain high, unemployment rises and households see an uncertain economic climate ahead.”

Bond added: “Spending power is set to rise further in the coming months as inflation continues to fall.  That’s why it’s our job as retailers to try and stimulate customer spending by keeping prices low.”