Household spending power drops almost 2% in biggest fall for four years

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UK families' spending power has fallen 1.9% year on year, the steepest decline since 2013, figures show.

Households had £194 of discretionary income a week in May, £4 a week less than the same month last year, according to the latest Asda Income Tracker.

Families with the lowest income have seen the biggest reduction in disposable cash, while those in the top bracket have stayed flat year on year.

The highest earners saw the largest year-on-year increase of 1.6%, meaning their pre-tax income was just short of £2,000 per week on average.

Vehicle fuels and electricity saw the greatest inflation year-on-year at an increase of 7.5% and 7.7% respectively, the tracker shows.

A survey by the retailer found that more than half of customers believe their disposable income will fall again over the next month, with only 2% believing their cost of living will decrease.

Some 83% of consumers believe that it will become more expensive to buy essential items over the next month.

The cost of essential items increased by 2.3% this month for families across the UK.

Electricity was 7.7% more expensive than in the same month a year earlier, and more than two-thirds of Asda customers think their electricity bills will continue to rise.

Vehicle fuel also posted a significant year-on-year increase of 7.5%, although this has dropped from the peak 20% earlier this year.

Centre for Economics and Business Research senior economist Kay Neufeld said: "The second consecutive month of falling family spending power confirms our expectations of a trend change in the Income Tracker. Families are faced with broad-based increases in the prices of essential goods and services as wage growth falls further behind.

"While the low oil prices help to bring down prices at the pump, households need to dig deeper into their pockets for most other goods and services.

"Unfortunately, the squeeze in households' finances is expected to continue over the next months as we see little evidence that wage growth will pick up and neither have we reached peak inflation just yet."