Markit has published its latest findings on UK households’ view of their finances which shows that households are reporting the slowest deterioration in their finances for two years.
The Markit Household Finance Index rose from 39.0 to 39.3, the highest score since December 2010 suggesting that the squeeze on household finances is easing.
This is the fifth rise in the index in six months, although it is still well below the neutral balance of 50.0.
28 per cent of households reported that their finances had deteriorated over the month, compared to 37 per cent of households in the same month last year.
Seven per cent of households reported an improvement in their finances over the last month.
Tim Moore, Senior Economist at Markit said: “November’s survey highlights that the alleviation of strains on household finances has continued as winter approaches.”
Markit said that part of the improvement in the outlook of UK household finances was down to lower inflation perceptions in October. However, the survey took place before last week when the Bank of England confirmed that the consumer prices index (CPI) measure of inflation rose by 20 per cent from 2.2 per cent to 2.7 per cent.
Tim Moore said: “The surprise uptick in consumer price inflation during October, alongside muted trends in employee earnings, suggests that the recent moderation in financial strains may prove somewhat transitory.”
Markit reported the lowest pressure on savings since May 2010. This is despite income from employment falling slightly over the past month.
Job insecurity increased slightly over the past month and households’ appetite for big-ticket purchases fell slightly in a worrying trend in the run up to Christmas. This was particularly marked for people who rent their property.
Markit reported that the index that shows households financial outlook also improved in November, up to 41.8 from 37.4. This is still the second lowest since May and shows that this measure of financial sentiment has failed to recover back to the level of 44.3 seen in September.
Around 40 per cent of households expect their financial situation to get worse in the next 12 months, compared to 23 per cent who expect it to improve.
Within this part of the survey, the outlook from public sector workers was markedly worse than amongst private sector employees, by 45 per cent to 35 per cent.
Households indicated that the squeeze on cash availability was easing for the third successive month. This meant that household savings dropped at the slowest pace for two-and-a-half years. Debt levels remained roughly unchanged in November.
The index measuring household spending rose to 53.5 in November, up from 51.4 in October and from 52.0 in November 2011.
The index measuring household current inflation expectations dropped for the first time in four months, down from October’s 13-month high of 87.6 to 86.1.
Twitter: My Finances
Join the conversation at #news_myfinances