UK families hit with biggest decline in spending power since 2013

 
Helen Cahill
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Inflation is squeezing consumer spending (Source: Asda)

UK families had £194 of discretionary spending in May, £4 less than the same month a year before, as inflation hit consumers' wallets.

The figures from Asda show that those on the lowest incomes were hit with the biggest fall in disposable income, with their weekly incomes falling by 28 per cent year-on-year.

Read more: Inflation jumps to hit four-year high of 2.9 per cent

Flat wages and rising prices for essentials left the lowest-income families with £26 less per week to spend on discretionary items.

Meanwhile, the highest earners benefited from an income increase of 1.6 per cent, bringing their pre-tax income to an average of £1,920 per week.

The most dramatic inflation over the past year has been seen in vehicle fuel and electricity, with prices rising by 7.5 per cent and 7.7 per cent respectively. Overall inflation spiked in May, reaching 2.9 per cent, the highest level since April 2012.

Kay Neufeld, Cebr senior economist, 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.

Neufeld said the squeeze on consumer finances was likely to continue over the coming months "as we see little evidence that wage growth will pick up", and inflation was also likely to climb.

Read more: Five ways to inflation-proof your money

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