Families £10 a week poorer, study says

After five months of improvements in the year-on-year change to the Asda Income Tracker, the report for February shows a "marginal reversal" of the trend.

The typical UK household had £144 a week of disposable income in February, with the decrease largely due to "fragility in the UK labour market", the report says.

Consumers are being "squeezed in both directions" by weak income growth standing at just 1.7% during the three months to January, the slowest pace in 18 months, and high inflation keeping the cost of basic goods up.

The study says unemployment is likely to continue to act as a drag on household finances and despite some recent improvements in the cost of utilities and transport, they remain two of the main factors putting pressure on families' spending power.

Squeezed budgets

Charles Davis, managing economist at the Centre for Economics and Business Research (Cebr), which produces the report, says: "While inflation is likely to fall further over the coming months resulting in smaller declines on the Asda Income Tracker, weakness is expected to remain in the UK labour market for some time and earnings growth to be only slow over the coming year.

"As a result, real income erosions are likely to continue for a third year in 2012."

The study says the cost of transport remains a "major factor" placing pressure on family budgets. Petrol and diesel prices rose by 4.2% and 4.7% respectively over the last year. These may increase further on the back of recent oil price rises, the report warns.

Andy Clarke, Asda president and chief executive, says: "It's disappointing to see a reverse in improvements to the cost of basics seen in previous months, putting a further pressure on already squeezed family budgets."