FAMILIES are £16 a week better off than they were this time last year as the economy continues to improve, a report has found.

Record falls in the price of weekly shopping and cheaper petrol at the pumps are all contributing to a boost in household finances, according to the latest Asda monthly Income Tracker.

With the Easter Bank Holiday on the horizon, researchers at the Centre for Economics and Business Research (Cebr) found that people had £64 more in their pockets in February compared to the same time last year, representing an overall increase of 9.2 per cent to family budgets.

Families' increasing spending power comes as supermarkets reel in prices, with the cost of food down by 3.3 per cent compared to last year, said to be the steepest decline for nearly 60 years. This has continued into April, with items such as Easter eggs down by 10 per cent.

The price of fuel was has also fallen by around 16 per cent last month, the largest annual drop in more than 25 years, with the global price of a barrel of oil continuing to stay low.

The income tracker estimates people's average disposable income and found families had £184 a month to spend in February on non-essential items compared to £169 at the same point a year ago.

Leaving out taxes, bills, transport and spending on items such as food, clothing and house maintenance and repair, the tracker calculates how much people have to spend on treats and enjoying the finer things in life.

And it found that people now have more money to spend on items such as children's toys, computer games, jewellery and holidays, eating out, and sports events than at any point in the last six years, with discretionary income at its highest point since 2009.

The improving financial picture comes as inflation hit 0.3 per cent in January, its lowest annual position since 1967. However, the falling cost of fuel and food meant essential item inflation fell deeper into negative territory, or "deflation" for the second time this year, dropping to minus 0.3 per cent last month.

Sam Alderson, an Economist at Cebr, said: "The large declines in the cost of food and fuel over the last year have supported a significant boost to household spending power.

"As long as households feel confident enough to spend this windfall, deflation should be short-lived and boost, rather than dent, economic activity."