Families '£1 a week better off'
UK households had £151 a week left over after paying essential bills in July, the highest amount of discretionary income recorded in 16 months, following a "marginal" improvement in incomes recorded in June compared with a year earlier, Asda's monthly study found.
%VIRTUAL-SkimlinksPromo%Recent falls in inflation and better-than-expected unemployment figures drove a 0.6% year-on-year increase in disposable incomes in July, representing the biggest improvement seen since March 2010.
However, the pressure on budgets could increase in the coming months as weaknesses in the labour market and wider economic uncertainty continue, the report warned.
Households have come under strain from high inflation which has pushed up living costs, at a time when they have also had low wage increases and struggled to find savings accounts that give them any real returns.
The income tracker said that food, clothing and transport inflation all fell back over July, while the unemployment rate also dropped to 8% during the three months to June, a decrease of 0.2 percentage points on the quarter and the lowest rate since June 2011.
There has been a general easing in the pressure on budgets since September last year, although UK families are still £8 a week worse off than they were two years ago.
The study said that slow pay growth and a "fragile" economic outlook are holding incomes back as the economy languishes in recession. It warned that increased price pressures from the cost of food and fuel could filter through in the coming months, as crude oil and food commodity prices rose in July.
Charles Davis, head of macroeconomics at the Centre for Economics and Business Research, which compiles the report, cautioned: "It may not be all plain sailing ahead as pressures remain.
"There is still much underlying weakness in the labour market and unemployment is likely to stay persistently high.
"In addition, recent increases in the cost of crude oil could well feed through into the cost of living in the coming months."