Friday, August 12, 2022

Household finances squeeze eases

The squeeze on household finances in the UK eased in January as consumers‘ perceptions of inflation, job security and credit availability improved, according to figures released today.

The latest monthly Household Finance Index from financial information services firm Markit, picked up to 37.7 this month following December‘s seven-month low of 36.8 as families see “gradual financial improvements”.

While 31 per cent of the 1,500 surveyed respondents conceded that their financial situation had deteriorated since the start of the year, six per cent noted an improvement and Markit said that the latest reading signals a slower monthly rate of decline at the start of the year.

Reflecting slower falls in cash availability and savings compared with a month earlier, the overall moderation also follows an improvement in current inflation perceptions as UK households reported the least downbeat sentiment about access to unsecured credit since the firm‘s monthly survey began four years ago.

Tim Moore, Senior Economist at Markit and author of the report, explained: “January‘s survey provides a rare spot of good news on the consumer front, with households‘ financial sentiment rebounding appreciably after a dismal end to 2012.

“Inflation perceptions are the lowest since last summer, while the index measuring households‘ appetite for major purchases picked up sharply from the near-record drop seen in December.

“Households‘ views on access to consumer credit were the least downbeat in at least four years and savings declined at the second-slowest pace since late 2010.

“Meanwhile, subdued overall demand for unsecured loans highlights that the underlying trend of conservative consumer borrowing has continued unabated into 2013.”

In terms of job security, the index recorded “mixed signals about the labour market”, as income from employment declined at its fastest rate in six months though perceptions of job insecurity hit a four-year record low.

Although sentiment for retail employees hit a ten-month low in December, the only private sector category to record a weaker outlook for the year ahead than the overall public sector, those working in financial/business services and manufacturing were the most optimistic about their financial outlook.

Household sentiment for the outlook of personal finances over the year ahead was the least downbeat since September last year as 39 per cent of respondents expect their financial position to worsen while 25 per cent anticipate an improvement in 2013.

Moore concluded: “There were mixed signals from the labour market bellwethers in the January survey, with job insecurities the lowest for four years, despite workplace activity stagnating and income from employment falling at its fastest rate in six months.

“The unfavourable economic backdrop and squeezed incomes are clearly making it difficult to keep household finances on an even keel.

“Overall, however, households are having to make hay while the sun isn‘t shining, and January‘s upturn from the lows of 2012 suggests that some gradual financial improvements are being made in spite of fragile conditions across the UK economy.”


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