Gloom lifts for cash-strapped UK households

Ben Southwood
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HOUSEHOLD gloom lifted somewhat in September, Markit said today, despite the ongoing economic slump.

Forty per cent of respondents expected their finances to deteriorate over the coming year, the data showed, down from 42 per cent in August. This pushed the year-ahead financial outlook index up to 44.3, from 43.5 – the least downbeat response since March 2010. A score of 50 indicates households expect no change in their finances.

The generally negative picture, despite mild improvement, was buttressed by the deterioration in the state of current respondents’ current finances. Thirty-one per cent said their finances worsened in September, versus just seven per cent reporting an improvement.

But Tim Moore, a top economist at Markit and author of the report was sanguine. “September’s survey suggests that the gradual easing of pressure on real incomes so far in 2012 continues to support household finances,” Moore said.

“A summer of relative calm on the household finance front has brought with it an improvement in expectations for the year-ahead,” he added.

But inflation expectations jumped from 83.3 in August to 85.8 this month – the sharpest rise for 20 months, suggesting gloom may return.

“Around three-quarters of households noted an increase in their living costs during September,” Moore commented, “the largest [monthly jump] since the January 2011 VAT rise.”