The average UK household had 3.2% less disposable income in January this year compared with in January 2007, according to Asda.
Asda's monthly Income Tracker report, which measures disposable income on a month by month basis, found that the cost of living had risen by 4.9%, leaving UK families with £138 disposable income per week to spend on leisure. This was down 3.2% against January 2007.
Asda added that even though average earnings before tax had risen by £22 per week, the average family was £5 a week worse off compared to last year. It said a number of factors had contributed to the rise in the cost of living, including transport costs (up 6.4%), petrol (up 19%) and food and drink (up 6.1%). However Asda said that clothing prices had fallen by 4.8%.
Asda chief executive Andy Bond said: "The latest figures indicate that 2008 is going to be a tough year for customers and confirms what we've known for some time, that household budgets are being stretched to the limit. A combination of factors is pushing up the cost of living for millions of families, making it more important than ever for retailers like ourselves to keep prices as low as possible. Only that way will we keep a lid on inflation."
Asda's Income Tracker survey is compiled by the Centre for Economics and Business Research.