By Daniel Hunter
At 40.8 in September, the headline Markit Household Finance Index (HFI) — which measures households’ overall perceptions of financial wellbeing — remained below the neutral 50.0 threshold. Around three times as many households reported that their finances deteriorated over the month in September (26%) as those that saw an improvement (8%).
However, the headline HFI figure was unchanged from that seen in August and one of the highest seen since the survey began in February 2009 (the index hit a record-high of 41.5 during July this year).
People working in Finance/Business Services (47.4) and IT/Telecoms (45.2) were the least downbeat about their household finances in September, while those in manufacturing (38.1) and construction jobs (39.9) were the most pessimistic.
The gap in financial perceptions between outright homeowners (44.1) and those renting from a private landlord (38.8) was the largest since February, perhaps reflecting the recent upturn in UK property values. For people that own their home outright, the index hit a 14-month high in September, while private renters saw a five-month low and those living in social housing recorded a three-month low (33.0).
Households remain pessimistic about the outlook for the next 12 months, with 38% anticipating that their finances will worsen and only 26% forecasting an improvement. At 44.1 in September, the resulting index reading was nonetheless slightly higher than the three-month low seen during August (43.8).
September data suggested a widening gap between financial expectations among the highest and lowest income groups. Households in the highest income quintile posted a three-and-a-half year high (55.5), while those in the lowest quintile posted one of the weakest readings since the start of 2013 (32.7).
“Strains on household budgets have receded since the beginning of 2013, and September’s survey suggests that better job security is also helping to bolster consumer confidence. With households’ assessment of their financial outlook improving in September, the latest survey provides a signal that August’s drop in UK retail sales will prove something of a statistical blip," Tim Moore, Senior Economist at Markit and author of the report said.
“This summer’s positive change of direction for the UK economy has resulted in the lowest degree of job security concerns for over four-and-a-half years. Moreover, the view from the coalface points to a strong end to the third quarter for the UK economy, as households reported another acceleration of workplace activity during September.
“While the headline figures make for encouraging reading, there are signs that subdued pay trends have widened existing gaps in financial well-being. Among the most notable divergences was a greater gap between the finances of homeowners and renters during September, while underlying trends reported by the lowest household income group became further detached from the overall picture.”
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