The spending power in UK households has been reduced as consumers deal with the pressure of higher inflation, according to the latest figures from Asda’s Income Trackers.

The cost of household essentials, including food, drink and transport, increased by 5.1% year-over-year, which led to more strain on household budgets.

Middle-income households saw their disposable income reduce by 1.6% in July, which marked the first decrease in two years.

Meanwhile, lower-income households experienced an 11.1% disposable income reduction in July, which was due to the increasing inflation of living costs.

Higher-income households remain widely unaffected due to faster income growth. However, the gap is narrowing.

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Sam Miley, Head of Forecasting and Thought Leadership at Cebr, said: “Inflation accelerated to 3.8% in July, the highest rate since January last year. The rise was driven primarily by sharp price increases in essentials, such as food and non-alcoholic beverages. This has been reflected in the Income Tracker, which showed only modest growth of 2.4% in the year to July.

“While wages are expected to rise over the remainder of the year, persistently high inflation will put continued pressure on purchasing power, weighing on further gains in the Tracker.”

Food and non-alcoholic beverage prices rose by 4.9% in July, marking the fourth consecutive monthly increase.

Recent data from the British Retail Consortium also showed that food inflation increased in August.