Asda has said that UK households can expect their spending power to continue to improve with prices of essential groceries dropping as inflation eases.

According to the supermarket’s latest Income Tracker, disposable income increased by 12% year-on-year in August, marking the fifth month of double-digit improvement.

After taxes and essential spending, the average UK household had a disposable income of £247 per week last month, surpassing the pre-cost-of-living crisis peak of £246 per week in March 2021.

It comes as despite inflation levels as a whole remaining unchanged since July, inflation on food and drink slowed to 1.3%.

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Asda expects that the average UK household is also now likely to have more cash in the run-up to Christmas, with inflation having dropped by 5% since last August, combined with the steadying of spending power.

However, the supermarket warned that the lowest income households will continue to feel the impact of the cost-of-living crisis for longer, as the spending power of these households is increasing slower than others, leaving them with an average weekly shortfall of £66.

CEBR senior economist Pushpin Singh said: “Despite the recent slowdown in earnings growth, annual wage growth continues to outstrip annual growth in consumer prices. With inflation now 5% lower year-on-year, further increases in spending power are expected in the coming months.

“That said, growth in spending power is expected to slow as wage growth eases further and inflation remains sticky at a level above the 2.0% target for some time. This could mean some households will take longer to fully escape the effects of the cost-of-living crisis.”