By Daniel Hunter

At 38.8 in November, down sharply from 41.0 in the previous month, the headline Markit Household Finance Index (HFI) — which measures households’ overall perceptions of financial wellbeing — was the lowest since April and well below the neutral 50.0 value.

Around four times as many households (29%) reported a deterioration in their finances during November as those that saw an improvement (7%). People working in the retail sector were the most pessimistic about their finances in November, while those employed in Finance/Business services and IT/Telecoms reported the least marked rates of deterioration.

November data signalled a worsening outlook for financial wellbeing over the next 12 months. Almost 42% of households expect that their finances will have deteriorated in one year’s time and only 24% forecast an improvement. At 41.2, the resulting index reading was down markedly from 44.2 in October and the lowest since February.

A worsening financial outlook since October was reported across all five income groups and among both private sector and public sector employees. People working in Education/Health/Social services are the most pessimistic, while Finance/Business services employees are the least downbeat.

Households reported a tighter squeeze on their cash available to spend during November, which contributed to the most marked drop in savings seen so far in 2013. The latest decline in cash available to spend was the sharpest since April, with 33% of respondents noting a reduction and only 8% an increase.

Reduced savings and falling cash availability continued to dampen households’ appetite for major purchases in November. Moreover, the latest index reading signalled the weakest appetite for major purchases so far this year.

The latest survey provided a positive signal for the UK labour market, as workplace activity increased for the tenth successive month and at a solid pace. That said, the overall rate of expansion eased further from the series-record high seen during September. According to the latest survey, IT/Telecoms was the strongest performing sector or workplace activity, followed by construction and manufacturing.

At 45.9, the index measuring job security was broadly unchanged from the previous month during November and remained close to the survey high recorded in September.

For the first time in two years, construction workers were the most positive about their job security, with this index reaching a survey-record high of 52.8 in November. Manufacturing employees were also positive about their job security (50.9), with the latest index reading one of the highest since the survey began almost five years ago.

Despite rising workplace activity, incomes from employment dipped slightly in November. At 49.6, down from 50.6 in October, the index has now posted below the neutral 50.0 value in three of the past four months. People working in IT/Telecoms (54.0) and construction (51.9) were the main exceptions to the overall trend of squeezed pay in November.

Tim Moore, Senior Economist at Markit and author of the report said: “November’s survey highlights yet another setback for UK household budgets as weak pay trends and energy price rises appeared to overshadow recent positive news about labour market conditions. Households’ views on their year-ahead financial outlook are now the most downbeat since February and well below those reported this summer, despite recent signs of stabilising job security.

“Inflation perceptions picked up during November while income squeezes were recorded in the majority of job sectors. With pay falling further behind living costs, households saw the fastest fall in their cash available for discretionary spending since April. Therefore, the latest survey highlights underlying fragilities in UK consumer sentiment and provides a timely reminder that bumper spending levels over the festive season are not yet baked in the cake.”

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