Households feel financial pressure

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Some 30% of UK households say they are feeling worse off against only six percent who are feeling richer – this despite stronger economic growth.

 “Stronger growth in the UK economy has done little to put a floor under the downturn in household finances. A downbeat mood spans the household income spectrum, but remains most acute amongst the lowest earners,” said Tim Moore, economist at Markit.

 

He said household finances continue to suffer from a backdrop of squeezed disposable income, high inflation and ongoing public sector spending cuts.

“Meanwhile, job security in the private sector fell at the fastest rate for thirteen months, suggesting that the renewed bout of employment concerns has reverberated beyond the public sector,” he added.

The Markit/YouGov Household Finance Index (HFI) based on a survey of 2,000 UK households posted 37.9 in August, with the rate of deterioration the second-fastest since June 2009.

Worsening household finances reflected a further decline in income from employment and a sharp rise in prices for goods and services in August. Meanwhile, falling job security continued to impact on household sentiment, with public sector workers particularly subdued about their future income levels.

Perceptions of falling house prices added to the anxiety of homeowners in August. The balance of respondents reporting a drop in house prices was the most negative since July 2009, while the outlook for house prices in 12 months’ time continued to deteriorate sharply from the levels seen at the start of 2010.

UK households remained pessimistic about the outlook for their finances in the next 12 months due to expected tax rises and government spending cutbacks. Close to 47% of UK households expect finances to worsen in the year ahead, compared to 25% that anticipate an improvement.

Job security remained a key concern for UK households in August. Around one-quarter reported a drop in job security, against just 6% that indicated an improvement.

 

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