Asda has announced it is taking £150 million off the price of goods, including toys, across the UK in the lead up to Christmas.
Asda CEO Andy Bond says the cost reductions will help customers save money when they really need it.
"Our research shows that the family budget is being stretched to the limit. That's why we've invested £150 million in our biggest ever set of festive price cuts," Bond said.
Calculations by economists CEBR show the average British family will spend £448 on Christmas drink, food, toys and gifts this year, an increase of three per cent on 2006.
CEBR chief economist Douglas McWilliams said: "Cheap consumer goods from the Far East meant that the cost of Christmas fell every year from 2000 to 2005. But this year, like last, Christmas will be a little more expensive.”
“This is for two reasons: first the fall in prices of goods from the East will be less than before, and second, market led food and drink price inflation will make festive eating and drinking more expensive."