Squeeze on UK household finances biggest in three-years – survey

UK households saw the amount of cash available to spend decline at one of the sharpest rates in the past three years in September, driven by a squeeze on real incomes from higher prices and low wage growth, according to a survey produced by research group Markit.

The IHS Markit Household Finance Index tracks Britons’ sense of financial wellbeing and is intended to anticipate changing consumer behaviour.

The average index reading dropped to 42.6 in the third quarter, the lowest since the same period in 2014. Markit’s seasonally adjusted household finance index was well off the neutral threshold of 50.0 at 42.8 in September, and down from 43.4 in August.

Still, households indicated a continued recovery in house price expectations in September – the metric hit a 10-month low in June – and spending lifted at a faster rate amid reduced savings and modest income growth.

Tim Moore, associate director at IHS Markit, said:

The subdued picture looks unlikely to change any time soon. While pessimism about future finances eased somewhat in September, sentiment remained among the gloomiest seen over the past three years.

The data was based on the results of a survey by polling company Ipsos Mori, which questioned 1,500 people.