Families suffered a 2.5% decrease in discretionary income in July, according to the Asda Income Tracker.
The decline means families had £5 less to spend compared to the same month in 2009. The average family had £175 per week in July.
An increase in price inflation was the single largest contributor, while annual growth in regular earnings eased over the three months to June to 1.6%, from 1.8% in the three months to May. The cost of living also continued to elevate.
The only area of spending which has helped was clothing and footwear, which decreased 3.1% over the year to July, compared to 1.4% in June.
Charles Davis, the economist at Cebr who compiled the report for Asda, said: “While inflation slipped in July, so did growth in average earnings. The Bank of England suggests that inflation will remain close to 3% for the remainder of 2010 and above 2% through 2011. This is going to occur within the context of a weak labour market and looming public sector job cuts. As such, the outlook for earnings growth is poor and it is unlikely to keep up with growth in the price of essential goods and services. The combined impact? Reductions in family spending power into 2011”.
Andy Clarke, Asda chief executive, said: “The latest figures back up what we forecasted last week, these are increasingly uncertain times for millions of families across the UK and our customers will need us more than ever.
“We’re shopkeepers not economists, but in this ‘age of austerity’ we know the pennywise will thrive. Our stimulus package for the economy starts with saving our customers money every time they shop – real money that can be saved, or spent elsewhere.”