Family spending power fell by £8 per week year-on-year in December, representing the 12th month of consecutive decline, says the latest Income Tracker from Asda.
This is the largest fall recorded since the income tracker began in January 2007. The average family had £172 per week to spend last month, down 4.5% from £180 this time last year. For 2010 as a whole, average weekly household disposable income was £4 below the average level for 2009 at £178, a 2.2% decrease.

According to the report, the main driver of this downward trend is the disparity between consumer price inflation and sluggish earnings growth. Gross incomes (excluding bonuses) grew 2.3% in December 2010 year-on-year, down from 2.6% in November. Meanwhile, the cost of essential goods and services rose 3.9% in December, compared with the same month last year.

Last month saw a sharp 3.7% annual rise on the consumer price index, compared with 3.3% in November - above the Bank of England's 2% central target. The increase between the two months was the highest on record.

Charles Davis, the economist at Cebr who compiles the report for Asda, said: "As this month's Asda income tracker shows, 2010 was a tough year for the consumer. The cost of essential goods and services rose at a faster pace than average wages. The elevated level of inflation in 2010 was mainly driven by the VAT increase in January 2010 and external factors driving up commodity prices: the return to economic growth across the globe pushing up demand and floods and droughts in China, Pakistan and Russia affecting supply. The sluggish wage growth is a result of the slack in the labour market that built up during the recession.

"The picture for 2011 looks set to be equally tough for the consumer. The VAT increase in January 2011 will keep inflation elevated this year, while public sector cuts will start in earnest. As such wage growth will remain modest. This is likely to result in lower levels of disposable income in real terms for families in 2011 compared with 2010."