Improvement seen in consumer finances

| October 22, 2012
Improvement seen in consumer finances

Two separate surveys have reported an improvement in household finances, bolstering optimism that the recession is coming to an end.

Although Markit, the financial information services company, reported a worsening in consumer finances in October, it was the smallest deterioration in the past two years.

The Markit Household Finance Index, which is designed to accurately anticipate changing consumer behaviour, increased from 38.4 in September, to 39.0 in October, its highest level since December 2010.

This was despite 29 per cent of respondents to the survey saying that their household finances worsened in October, compared with just seven per cent who reported an improvement.

Consumers remained concerned about economic downturn and rising energy bills, but stable employment income, an easing in the availability of cash and a significant fall in levels of debt, all helped to reduce the squeeze on household finances during the month.

Markit economist Tim Moore said: “While pressures on current finances were reported to have moderated again, helped by stabilising incomes and lower debt, the steep reversal in future sentiment is a clear signal that households are likely to keep a tight rein on spending in the months ahead”.

Deloitte’s latest Consumer Tracker survey suggests that consumer confidence is at its highest level since the third quarter of 2011.

Concern about the level of disposable income eased from 43 per cent in the third quarter of 2011 to 33 in the 2012 same period, Deloitte said.

Only 14 per cent of households saw their income fall in the 2012 third quarter, compared with 19 per cent a year ago.

Deloitte also reported an upturn in employment prospects, with 10 per cent of households reporting that a household member had started a new job during the quarter, the highest level this year.

Ian Stewart, chief economist at Deloitte, said: “The Consumer Tracker points to a reduction in the stress on the household, with consumers more positive about their income, employment and working hard to balance the books by reducing their levels of debt.

“These shifts in consumer behaviour tie in with the official data that highlights a general improvement in the consumer market.”

The Office for National Statistics is expected to report 0.7 per cent growth in the UK economy when it releases its latest official figures this week.

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