Household finances best for 6 years

Published: Wednesday 22nd April 2015 by The News Editor

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The squeeze on household finances eased to its best level in at least six years in April, a report has found.

The more optimistic picture is being helped by consumers feeling better about the impact of living costs on their budgets and the ongoing upturn in the labour market, according to the Household Finance Index compiled by Markit.

The overall reading in the index climbed to 45.8, up from a reading of 45.5 in March. Readings above 50 signal that the situation is improving, while ones below 50 indicate that it is getting worse.

Markit said that April’s survey, which interviewed 1,500 Britons aged between 18 and 64, points to the mildest squeeze on household finances since the survey began in early 2009.

Households in the South East of England gave the brightest financial assessment in April, closely followed by those in Yorkshire and the Humber. People based in the North East of England were the most downbeat.

Markit said that continued improvements in the labour market helped to ease the strain on households, with income from employment rising at its fastest rate since the index started.

Workplace activity increased for the 35th month in a row in April. Construction workers reported the fastest increase in business activity during the month, followed by IT and telecoms employees. By region, workplace activity rose fastest in the West Midlands.

A further boost to financial well-being was provided by consumers’ “relatively muted” perceptions about inflation, Markit said. It said that consumers’ expectations about the living costs they expected to deal with in the year ahead remained more positive in April than the long-term trend.

The Consumer Price Index (CPI) rate of inflation remained at zero in March, the same as in February, according to figures recently released by the Office for National Statistics (ONS) .

Cheaper clothing and footwear and supermarket price wars have helped to push inflation lower. Economists have predicted the rate could fall further in coming months.

With households experiencing zero inflation, expectations about when the Bank of England base rate is likely to increase from its historic 0.5% low, pushing up borrowing costs, also eased back.

Just 10% of households surveyed in April expect to see interest rates increase in the next three months, down from 11% in March. Around 54% of households forecast higher interest rates within the coming year, down from 57% in March.

Philip Leake, an economist at Markit, said: “Data from Markit indicated that the strain on UK household finances was at the least pronounced in the survey’s history in April.

“Labour market improvements and low inflation perceptions remained the key factors behind the optimism.”

Published: Wednesday 22nd April 2015 by The News Editor

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