Rising costs eat into spending

The average UK household had £166 a week of discretionary income to spend in July, according to the Asda Income Tracker, which is 6.4 per cent lower than a year earlier.

The consumer prices index (CPI) rate of inflation increased to 4.4 per cent in July, from 4.2 per cent in June, as conditions in the labour market also worsened, supermarket Asda said.

Family budgets were squeezed as the cost of travelling increased by 16.5 per cent year on year, according to the AA, while food prices remained high despite food price inflation easing marginally.

Andy Clarke, chief executive of Leeds-based Asda, said: “The maths is simple – the rising cost of feeding the family, getting around and increasing unemployment add up to the biggest squeeze on families since the last recession.”

Average earnings increased marginally faster over the year to July but conditions remained constrained, Asda said.

The company found customers were half-filling petrol tanks and cutting their own hair instead of visiting the hairdressers to deal with the spending squeeze.

Charles Davis, managing economist at think-tank Cebr, said: “Pressure on household finances continued to mount up in July as the cost of essential spending grows rapidly while wage increases remain slow.”