Asda has said UK families were £12 a week worse off in December 2011 than a year earlier.

The grocer said the average UK household had £160 a week of discretionary income in December, 7.2% lower than a year earlier

The reduction in budget was attributed to a sharp increase in unemployment, despite some improvements in the cost of living.

Annual consumer price inflation slowed to 4.2% in December. This is the third consecutive improvement in the rising cost of living, helping to ease pressures on household spending power.

Asda said average regular wages grew 19% over the years but gas and electricity prices rose by 19.8% and 14.1%respectively while fuel prices also increased significantly.

Discretionary spend in London was £274 per week in the fourth quarter 2011, compared to a UK average of £161 and four times higher than cash available to families in Northern Ireland, who have just £74 a week left over after essential bills are paid.

Asda president and chief executive Andy Clarke said: “It’s encouraging to see the cost of some essentials coming down, easing the pressure on family budgets and redressing some of last year’s inflation.  

“However we know jobs still matter, with the highest levels of unemployment for 17 years having a real impact on the way families feel.

He added: “Unemployment drove the continued drop in disposable income in December, with a growing divide between the nations and regions.”