Growth in spending power fell to its lowest level since the start of the year in November, according to a new report by Lloyds TSB.
The bank blamed weak income growth and increases in the cost of essential items for the decline.
It said incomes grew by only 1.9 per cent in the year to November, while spending on essentials rose by 3.9 per cent in the same period, which meant consumers have around £20 less available a month for discretionary spending.
Almost two fifths of consumers were looking to reduce their spending this Christmas, with a quarter relying on savings to fund their spending, and more than a third turning to credit cards.
Lloyds said consumers had become increasingly negative about Britain’s financial and employment prospects.