The average UK family had £4 a week less to spend in October compared to a year ago, according to the Asda Income Tracker.

It marks the tenth consecutive month of falling household spending power, with discretionary income down 2% compared to October 2009. The average family had £176 per week to spend in October, down from £180 this time last year.

The continued reduction in family spending power was the result of annual net income growth failing to keep pace with the rise in the cost of essential goods and services. The price of goods and services has been driven up as many essentials has been disrupted by poor weather, sterling weakness feeding through to consumer prices, and the demand from emerging countries pushing up the price of commodities.

The main factor though is transport, which remained the single most important element of consumer price inflation, accounting for approximately 30% of the headline rate. According to the AA the cost of unleaded petrol rose by 12% between October 2009 and October 2010.

Unemployment fell unexpectedly by 3,700 between September and October, although the fall suggests a move towards part-time and self-employment.

Charles Davis, the economist at Cebr who compiles the report for Asda, said: “October marks the tenth month in a row where family spending power has fallen relative to the previous year. Annual household earnings growth has continued to fail to keep pace with the rise in the price of essential goods and services.

“The Bank of England’s November Inflation Report shares our view of inflation remaining above target for the whole of 2011. Sterling’s past depreciation continues to feed through to consumer prices. This is being compounded by rising commodity prices, due to supply side shocks and demand from emerging economies.

“Looking forward, the VAT hike to 20 per cent in January will add further pressure on household budgets in 2011, as will news of price hikes in the utilities sector of up to 7 per cent in December.”

Andy Clarke, Asda chief executive, said: “The latest Asda Income Tracker shows families’ disposable incomes were £4 a week lower in October 2010.

“In this environment UK businesses are acutely aware of their responsibilities to keep a lid on costs to enable them to ease the burden on customers.”