British households have £16 more spending power each week thanks to slowly rising wages and the falling cost of essentials like energy, food and fuel, new research suggests.

In January last year, UK households had an average of £169 disposable income each week, but that figure has now risen by £16 to a new record high of £185, according to the latest Asda Income Tracker.

Since this time last year, the rate of inflation has fallen to a current record low 0.3 per cent. Energy costs have fallen by 2 per cent, while the cost of filling up at the forecourt and stocking up on groceries has dropped by an annual 16.2 per cent and 2.5 per cent respectively, the Income Tracker estimates.

Time to indulge: UK households now have an average of £185 disposable income each week to spend how they like, the Asda Income Tracker report produced by Cebr says

Households have seen their spending power increase over the last 12 months in line with falling inflation. Bank of England governor Mark Carney has announced that UK inflation levels are 'more likely than not to turn negative at some point in Spring'.

Average household incomes are on the up, with Asda's report calculating that the average household now earns approximately £611 per week after tax. This is 3 per cent higher than last year and, in part, is the result of an increase in the income tax free personal allowance to £10,000 last April.

After spending an average of £426 per week on 'essentials' like food, bills, energy and housing costs, households are left with £185 each week to spend as they wish, the report says. This £185 means that households have £16 more in their pockets to spend than last year.

With regular pay growth remaining relatively steady, gross household incomes continued to rise year-on-year by 2.6 per cent in January 2015, supported by continued falls in the rate of unemployment.

Sam Alderson of Cebr said: 'With such strong increases in household spending power, it is perhaps unsurprising that retailers are beginning to report better than expected sales during the first few weeks of this year'.

Towards the end of last year, unemployment levels in the UK fell to 5.7 per cent to 1.86million people. The UK's unemployment rate now sits 1.5 percentage points below the level recorded during the same period a year ago, the report says.

Changing times: Households have £16 more disposable income to spend each week than they did in 2014, Asda's Income Tracker report says

Long-term unemployment also fell by 210,000 last year among those out of work for more than a year, to 638,000.

But, controversial zero-hour contracts are on the rise, with UK firms using 1.8million of them last summer, figures from the Office for National Statistics revealed today.

Nearly 700,000 workers said they were on a zero-hour contract from October to December last year, representing 2.3 per cent of all people in employment.

Sam Alderson said: 'With wages rising and inflation likely to remain subdued for much of the year, households are likely to provide a key driver of growth for the UK economy in 2015'.

Alongside rising employment levels providing more people with disposable income, falling food and non-alcoholic drink prices are giving households to spend more on what they want.

The prices of food and non-alcoholic drinks dropped by 0.7 per cent between December 2014 and last month, with notable falls in the price of milk and fruit.

Given that food prices increased slightly a year ago, these recent price cuts take food prices 2.5 per cent below the level in January 2014, according to the report.

Having an impact: Inflation of selected goods, annual change to January 2015

The price cuts coincide with continuing supermarket price wars, with the likes of Asda, Tesco, Sainsbury's and Morrisons battling to keep up with discounting rivals Aldi and Lidl.

In a bid to counter the threat from Aldi and Lidl, last month Asda announced £300million worth of price cuts on 2,500 essentials' including fruit, milk, meat and vegetables.

Sales fell at all the 'big four' supermarkets last year, with Sainsbury’s results the best with a sales decline of just 0.7 per cent as it overtook Asda to become the UK’s second biggest grocer by market share, behind Tesco, who saw a 1.2 per cent fall in sales. Asda and Morrisons saw sales decline by 1.6 per cent.

Falling fuel costs have also played a part in boosting people's ability to spend more on small luxuries like eating out or going to the cinema, the report said. The average price of petrol fell by 8.5p per litre last year and currently stands at its lowest level since November 2009 at 108.3p per litre.

Fuel costs fell on the back of sharp drops in oil prices last year. A barrel of Brent crude slipped to a low of nearly $45 in mid-January from $110 in summer 2014. Today, it has risen to $59 a barrel.

More people in work: The number of people in the UK who are unemployed fell to 1.86million at the end of last year

In principle, falling energy bills provide another potential opportunity for people to spend their money on life's luxuries.

Asda's report says that energy bills have fallen by 2 per cent last year, but note that the real impact of falling bills will not come to fruition until later in the year.

Last month, some of Britain's Big Six announced they were cutting energy bills.

EDF cut gas prices by 1.3 per cent from 11 February, while E.On is bringing its bills down by 3.5 per cent.

SSE is reducing bills by 4.1 per cent in April and Scottish Power customers saw their bills cut by 4.8 per cent earlier this month.

British Gas announced that it is cutting consumer bills by 5 per cent on 27 February and Npower reduced bills on 16 February by 5.1 per cent. Smaller rival Ovo is cutting customer bills by 10 per cent in response to falling wholesale costs.

But, findings from consumer group Which? recently found that if household bills had been properly aligned with falling wholesale costs, recent cuts should have been in the region of 8 or 10 per cent.