Record decline in household incomes from employment in May – index

Household incomes from employment deteriorated at the fastest rate in more than a decade in May, according to an index.

The decline in incomes was the sharpest since records started in February 2009, the index, compiled by IHS Markit, said.

Before that the strongest decline in incomes was in March 2009.

The index also said workplace activity continued to decline in May, with households employed in media, culture or entertainment sectors indicating the sharpest decline in activity.

The latest research asked 1,500 people across Britain aged 18 to 64 about their finances between May 7 and 10.

The index also produces an overall reading – with readings over 50 suggesting financial wellbeing is improving and those below that mark indicating it is getting worse.

The latest overall index reading was 37.8 in May, up only slightly from April’s eight-and-a-half year low of 34.9.

The report said: “While the headline number did rise, it remained among the worst seen since the survey’s inception in 2009 and signalled a further sharp deterioration in the financial health of UK households.”

Debt levels remained stable in May, with an avoidance of rising consumer borrowing largely achieved through a rapid fall in household spending, the report found.

Joe Hayes, an economist at IHS Markit, said: “It is unsurprising to see further woe for UK households in May, with our UK Household Finance Index revealing that finances remained under severe pressure.

“The financial toll of the coronavirus pandemic and the consequent public health measures has been heavy, with recent survey data showing unparalleled declines in workplace activity and incomes from employment.

“It is also disconcerting to see so many survey respondents indicating concern towards job security, which could have a significant impact on consumer spending if the negative economic impact of the pandemic is protracted.

“Nevertheless, there still appears to be little stress on household balance sheets, although this partly reflected a survey-record slump in household spending during May.

“Debt levels were broadly unchanged and unsecured (non-mortgage) lending needs such as credit cards barely rose.

“The concern for the household sector remains the labour market, which will be vital in determining the speed at which consumer spending can return once the economy emerges from the lockdown.”