Squeeze eases on finances but mood still gloomy, study finds

The financial squeeze on households has eased in June but people remain downbeat about the outlook for the year ahead, a report has found.

The Household Finance Index compiled by financial information services provider Markit showed an improved reading of 44.9 in June, up from 42.3 in May.

The study said the latest reading "pointed to a rebound in financial perceptions since May, when the index slipped to a 22-month low".

The index asks 1,500 people aged between 18 and 64 years old about the state of their finances - readings above 50 signal households' situations are improving and readings below 50 show they are getting worse.

But while households feel their current financial situation is easing, expectations for the year ahead remained downbeat for the third month in a row - marking the longest sequence of pessimism since September 2014.

A reading measuring households' expectations in 12 months' time remained unchanged at 49.6 in June. While this points to only a slight degree of pessimism, it marks a break from upbeat readings for the year ahead recorded in February and March, the report said.

Just over half (52%) of those surveyed expect the Bank of England base rate to rise from its historic 0.5% low in the coming year.

The report said that improvements in the labour market, with rising income from employment and stronger growth in workplace activity, were behind the improved household perceptions about their current financial situation. Household spending also increased at the fastest pace in nearly a year.