Households more optimistic about their finances

| August 20, 2012 | 0 Comments
Households more optimistic about their finances

Household finances are still deteriorating, but at a slower rate, according to the Markit household finance index.

The index increased from 37.5 in July to 38.9 in August, with figures above 50 representing a positive change in household finances, and figures below 50 representing a negative change.

The August figure represents the third consecutive monthly increase and the slowest deterioration of household finances since December 2010.

While 29 per cent of households expect their finances to improve in the next 12 months, 42 per cent expect them to deteriorate.

Manufacturing and construction workers were the least optimistic over their finances, while IT and telecoms workers were the most positive.

Private sector workers were more upbeat than public sector workers over the possibility of a pay rise in the year ahead.

Just 25 per cent of public sector employees expect their pay to increase, compared with 39 per cent of private sector employees.

According to the study, pressure on household incomes has improved as a result of a stabilisation of debt levels, recent falls in inflation and rising employment levels.

Levels of employment reached 71 percent in the three months to April, the highest level for four years.

Tim Moore, senior economist at Markit, said: “While the Olympics perhaps helped give a warmer glow to household morale, the breadth of improvement spanning debt trends, inflation expectations, incomes and job security points to a more fundamental easing of the financial downturn.”

A separate study by Lloyds TSB found that households are no better off financially than they were a year ago.

The study found that spending power had failed to grow in July 2012, compared with July 2011, suggesting that high street growth will continue to founder.

Jatin Patel, director of current accounts for Lloyds TSB, said: “Annual growth in essential spending is not putting downward pressure on budgets in the same way as it was earlier in the year, but with income growth still weak, we are yet to see any noticeable improvement in the amount of money people have left over for discretionary purchases.

“Until we see this, spending on the high street will likely remain subdued for many in the near future.”

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