Household finances suffer setback

Updated: 

money

Household finances have this month seen their biggest setback since April despite signs of improvement in the economy, a report has found.

Four times as many families (29%) said their finances worsened in November compared with those who saw an improvement (7%), according to financial information firm Markit.


In concerning signs for the high street as Christmas approaches, the survey indicated the weakest consumer appetite for major purchases recorded so far this year.

The overall reading measuring households' financial wellbeing dropped to 38.8, from 41.0 the previous month and marking the lowest reading recorded since April. A reading over 50 indicates the situation is improving and one below this that it is getting worse.
Tim Moore, senior economist at Markit, suggested that a recent string of price hikes announced by energy companies have dampened household's perceptions amid some more positive news about the labour market, with sentiment about job security reaching a new high this month.

More than two fifths (42%) of 1,500 households surveyed across Britain predict their finances will deteriorate in one year's time and less than one quarter (24%) expect to see an improvement. Markit said these forecasts are the most pessimistic it has seen since February.

People working in education, health and social sciences were the most downbeat about their prospects and those in finance and business were the least.

The survey also recorded the most marked drop in savings seen so far this year as households reported a tighter squeeze on the amount of cash they had to spend.

The latest decline in spending power was the sharpest seen since April, with one third (33%) of people seeing a reduction in their spare cash, and only one in 12 (8%) having an increase.

But the latest survey also provided a positive signal for the labour market, with workplace activity increasing for 10 months in a row. The IT/telecoms sector saw the biggest expansion, followed by the construction and manufacturing sectors.

For the first time in two years, construction sector workers were the most positive about their job security, with this index reaching a new high of 52.8 in November.

Mr Moore said: "November's survey highlights yet another setback for UK household budgets as weak pay trends and energy price rises appeared to overshadow recent positive news about labour market conditions.

"Households' views on their year-ahead financial outlook are now the most downbeat since February and well below those reported this summer, despite recent signs of stabilising job security."

He said the latest survey is "a timely reminder that bumper spending levels over the festive season are not yet baked in the cake".

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