Growth in shoppers’ spending power slowed for the fourth consecutive month in January when inflation was at its highest since January 2015.

The average household had £197 disposable income per week in January, up £12 on the previous year.

However, the 6.7% year-on-year uplift in spending power was down on December’s 7.2%, the Asda Income Tracker showed.

It was the fourth consecutive month of slowing growth in spending power, blamed on low wage growth and a rise in inflation. 

Average weekly earnings rose 2% year on year in January, when inflation rose to 0.3% – up for the third consecutive month and at its highest level since January last year.

Increased employment

Despite the rise in inflation the overall outlook for UK consumers is positive. The employment rate of 74.1% was at its highest level since before the financial crash.

The rise in employment was accompanied by a drop in prices of essential household items in January, which edged down 0.1% year on year.

The January Sales meant that prices of food, drink, clothing and footwear fell on the previous month, while fuel prices were down 7.3% year on year.

Asda chief executive Andy Clarke said: “Another double-digit increase in disposable income in January gave a welcome financial boost at a tough time of year. In juxtaposition, annual growth in spending power fell year on year for the fourth consecutive month.

”The good news for consumers is that the competitive retail environment is translating to lower prices across the board.”

CEBR economist Sam Alderson observed: “Although growth in family spending power has declined in the latest data, the overall picture is positive. Consumers have much more money to spend than a year ago.

“We expect continued falls in unemployment as well as rising earnings growth over the coming months. Combined with sustained low inflation, households should be in for a good time in 2016 as far as their finances are concerned. This comes despite broader concerns over the strength of the UK economy.”