Big squeeze hits family finances

 
Kasmira Jefford
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FAMILY finances are deteriorating at a faster rate than during the depths of the recession, as spiralling energy costs, soaring inflation and falling take-home pay combine to squeeze household spending power, according to new figures released today.

The Markit Household Finance Index (HFI) fell to 33.2 in August, with almost 40 per cent of those polled reporting a deterioration in their finances between July and August compared to just six per cent reporting an improvement.

This is the lowest reading since the survey began in February 2009, signalling that the rate of deterioration in household finances was faster between July and August than during the height of the recession. Families also reported the fastest fall in disposable income since early 2009, and a drop in income from employment for the eleventh month in a row.

The squeeze has taken its toll on savings, which fell at their sharpest rate since March 2009. Thirty-four per cent of households reported a drop in their savings in August, compared to just nine per cent that saw an increase.

Meanwhile, debt levels increased for the fifth month running, with 22 per cent of households reporting an increase against 17 per cent experiencing a fall.

As a result, households are less likely to purchase a big ticket item such as a new television than at any time since January 2011, when VAT was hiked to 20 per cent.