This is how much disposable income the UK had in December

Helen Cahill
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(FILES) A picture taken 17 April 2007 in...
Londoners had an average disposable income of £275 (Source: Getty)

UK households celebrated a rise in disposable incomes in December last year - but it is thought spending on non-essentials will slow in 2017 as inflation starts to bite.

Families had an average £202 of disposable income in December 2016, a rise of 4.4 per cent (or £8.57) on the same month a year before, according to Asda's income tracker.

Discretionary incomes rose fastest in the North East and Yorkshire, up by 10.1 per cent and 7.9 per cent respectively.

However, the devaluation of the pound is expected to push inflation to three per cent this year. In December, inflation was 1.6 per cent, the highest rate for a year and a half. This was largely due to increasing petrol prices, which rose 10 per cent year-on-year.

Read more: Inflation hits 1.6 per cent: Experts react to increase

Food prices fell 1.1 per cent, however, and net income rose 2.3 per cent year-on-year, cushioning the effects of rising inflation.

Kay Neufeld, economist at CEBR, said: "In the last months of 2016 we have seen an uptick in wage growth due to low unemployment and the lagged effects of the national living wage.

"The question in 2017 will be whether wage growth can keep up with rising inflation. Early indicators suggest that the labour market will soften over the coming months - an increase in unemployment and lower wage growth are on the cards, potentially putting a dent in households' spending power."

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