Average spending power fell again in January to extend the squeeze on household incomes, according to the latest Asda Income Tracker.

The monthly measure of consumer spending has shown a further reduction in disposable income in January, with family spending power fell by £1.13 (0.6%) per week compared with the same month last year.

The drop, which is the ninth reduction in the last 12 months, means families now have £200 per week disposable income available to them after paying for household essentials, extending the squeeze in household incomes into the new year.

The reduction was driven by high inflation – which stood still at 3.0% (as measured by the Consumer Price Index) – and prices for essential goods and services continuing to rise.

This month’s income tracker again shows a differing situation for disposable incomes depending on gross income.

Only the richest 20% saw their average spending power rise in January, as discretionary incomes grew by 1.5%, despite gross income growth for this group (before tax and essential spending) slowing quarter on quarter.

Some 80% of families experienced a decline in spending power during the period.

However, Asda said that spending power is likely to rise again in the latter half of the year as inflation is expected to fall back as the year progresses.

Kay Neufeld, Economist, Cebr, said: “For UK households, the new year started with more bad news for discretionary income growth. Inflation remains stubbornly high with some of the key spending categories for households seeing the strongest increases such as electricity, clothes and recreational goods and services.

“While the impact of the sterling depreciation on prices starts to fade, the risks are that a tighter labour market leads to higher domestic inflationary pressures. As long as the current trend in accelerating wage growth holds, however, households can hope that their income growth will at least match the rate of price increases towards the middle of the year.”