By Daniel Hunter
The August Markit Household Finance Index (HFI) has highlighted generally improving trends among UK consumers, with access to unsecured credit close to stabilisation and cash availability falling at the slowest pace for more than three years.
This in turn contributed to a solid rise in household spending during August. Living costs were perceived to have increased at a weaker rate than in July, and the year-ahead inflation outlook moderated to its lowest since May.
The headline Markit Household Finance Index (HFI) — which measures households’ overall perceptions of financial wellbeing — dipped only slightly from July’s survey-record high of 41.5. At 40.8 in August, the latest reading was below the neutral 50.0 value but well above the average since the survey began in February 2009 (37.8).
People working in Finance/Business Services were the most upbeat (50.4) about their financial wellbeing, while Construction employees reported the most downbeat assessment (32.4).
Households’ financial outlook for the next 12 months dipped from July’s 40-month high. At 43.8 in August, down from 45.3 in the previous month, the index was the lowest for three months but comfortably above the survey average (40.6). In line with the trend for current finances, those working in Finance/Business Services are the most optimistic (53.4), while those employed in Construction are the most pessimistic (42.2).
Households indicated an alleviation of the squeeze on their cash availability in August. At 41.1, the index measuring cash availability rose markedly from 37.9 in July and was the highest since May 2010. The index reading for employees in the private sector hit a series-record high of 43.1 in August, but the latest reading for public sector staff was unchanged from 38.1 in July.
Meanwhile, households’ perceptions of unsecured credit availability were the least downbeat since the series began in February 2009. At 48.4 in August, up from 47.7 in July, the index has now risen for three months running. People that own their home outright were the most positive about access to unsecured credit (51.0), followed by mortgage holders (a series-record high of 48.5 in August).
Households reported an increase in spending during August, with almost one-in-four respondents noting a rise (24%) and only 16% a reduction. Meanwhile, although households were averse overall to purchasing big-ticket consumer items, the index measuring appetite for major purchases remained level with July’s three-year high (37.5).
“The survey’s headline barometer of financial health remained relatively high in August, despite failing to match the four-and-a-half year peak seen during July," Tim Moore, Senior Economist at Markit and author of the report said.
"A number of factors have combined to support UK household finances this summer, including improving underlying economic conditions, lower consumer price inflation and a general alleviation of strains on cash availability.
“A brightening economic and financial outlook, alongside some signs of improved access to household credit, looks to have spurred consumer spending again in August. Moreover, while survey respondents indicated an overall aversion towards making major purchases, the latest figures showed households remain more inclined to buy big ticket consumer items than at any other time over the past three years.
“August data suggested that the strains on finances are receding fastest among those in private sector service jobs, while those working in construction, retail and the public sector trail behind. On a regional basis, familiar trends continued in August as people in Scotland and the south of England were the least downbeat about their finances, while those in Wales and the north of England were among the most pessimistic.”
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