Family spending power fell by £14 a week in August when compared to last August, according to the latest figures from Asda Income Tracker – the biggest decline since it began recording in January 2007.
The squeeze left the average UK family with £162 of weekly disposable income – 7.9% less than this time last year – and 90% of people say things are tougher now than they were a year ago.
Commenting on the findings, Asda president and CEO Andy Clarke said: “It’s clear from this record drop in disposable income that British families have never had it so tough.”
Consumers are being hit from all sides, said Asda, with annual inflation on the consumer price index growing again to 4.5% in August, up from 4.4% in July, and continuing to outpace income growth.
Conditions in the labour market have worsened this month, and this is likely to continue into 2012 as public sector cuts start to take effect.
Family budgets are squeezed further by the rising costs of gas and electricity. And figures from the AA show that the cost of unleaded petrol grew by 16.5% per cent over the year to August.
Charles Davis, managing economist with Cebr, warned: “With the UK economy in a particularly precarious state at the moment, things could get worse before they get better. However, inflation should fall back in 2012 and the Bank of England is unlikely to raise interest rates any time soon given the weakness in the UK economy.”