Cost of Living: UK Family Spending Power Continues to Rise

The cost of living in the UK is easing as family spending power continues to rise.

According to supermarket giant Asda's Income Tracker, household spending increased by £3 a week, year-on-year in January.

The research revealed that the rise was driven by a fall in the rate of essential item (CPI) inflation to 1.9%, the lowest rate in four years and below the government target of 2%.

The study also found that the average UK family had £160 a week of discretionary income in January 2014 - the fourth consecutive month of annual spending power growth.

"The UK economic outlook at a macro level continues to show positive growth and on the surface family finances appear to be steadily picking up," said Andy Clarke, president and chief executive of Asda.

"However, this week's unexpected rise in the unemployment rate [to 7.2%] can only serve as a cautionary sign that the economy remains volatile and susceptible to shocks."

"My concern is that these shocks may weaken what is already a fragile recovery and one that customers around the country tell me has not yet filtered out to all regions."

Asda said the figures indicate that the benefits of economic recovery are beginning to feed through to UK households, as weekly discretionary incomes climb ever closer to the all-time high of £165 seen in early 2010.

The report explained a fall in the price of essential items is the key factor driving the growth in the Income Tracker.

A fall in the cost of vehicle fuel (down 1.8%) for the fifth consecutive month and low food price inflation (2.0%) provided a welcome boost to family spending power.

In addition, Asda said the rate of food price inflation is now well below the rates of around 4.0% seen throughout much of 2013 and the second half of 2012.

Rob Harbron, senior economist at Cebr, added: "It's encouraging to see the effects of economic recovery now feeding through into sustained growth in average household spending power.

"Inflation is expected to remain low over the coming months and the labour market is projected to show further improvements and as such, this trend of rising discretionary incomes is likely to continue this year."