Financial strain on UK households eases

UK households are more upbeat on their finances in June compared to a 22-month low in sentiment seen last month, according to the latest household finance index released by Markit.

The index, which tracks Brits’ sense of financial wellbeing using data collected by Ipsos MORI, improved to 44.9 from 42.3 in May.

Although the figure is still below the neutral level of 50, it is above the average of 44.4 recorded so far this year, Markit said.

One of the factors behind the recovery was a rise in incomes led by the private sector. Income from employment overall increased for the third straight month with the growth rate at a 14-month high.

Coupled with more workplace activities, Markit said this could indicate further improvements in the labor market.

Brits felt more comfortable about their job environment with the job security index climbing to its highest level in 2016.

Still, households remained downbeat on the outlook. The index on expectations for finances in 12 months’ time was unchanged from May at 49.6.

Philip Leake, economist at Markit, said:

Survey highlights included faster growth of workplace activity and income from employment… Inflation perceptions were meanwhile broadly stable, and household spending rose to the greatest extent in nearly a year.

That said, households’ financial projections were downbeat on average for the third month running – the longest sequence of pessimism since September 2014.

When asked about monetary policy, the proportion of respondents expecting a rise in the base rate over the coming year rose back above 50% in June. That said, expectations remained dovish compared to those seen at the start of 2016.