Families are £7 better off a week than this time last year, with £164 discretionary income to spend, according to the latest income tracker report published by Asda and the CEBR.

The extra income has largely come from the Bank of England reducing interest rates – meaning mortgage interest payments are on average 45% lower than a year ago.

This time last year, rocketing commodity and fuel prices had pushed inflation to a 30-year high.

“Spending power has increased relative to a year earlier in both April and May. However, this is not necessarily translating into increased spending on the high street – as shown by the 0.6% month on month fall in retail sales in May,” said CEBR economist Charles Davis.

“This is due to increased levels of precautionary saving as consumer debt levels remain high, unemployment rises and households see an uncertain economic climate ahead.”

Asda chief executive Andy Bond said many of Asda’s customers were still concerned about the economy.

“News that consumers are benefiting from cuts in mortgage payments is certainly reassuring and although we’re better off year on year, this by no means signals the end of difficult times for our customers,” he said. “Many of our customers are still worried about the uncertainties surrounding job security as there is no real sign of an up-turn in the labour market.

“Spending power is set to rise further in the coming months as inflation continues to fall.  That’s why it’s our job as retailers to try and stimulate customer spending by keeping prices low.”