Households expect even worse squeeze on finances is coming

Ben Southwood
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HOUSEHOLD budgets dipped once more in February, and look set to get even worse in coming months.

Markit’s headline household finance index was stuck at 37.7 in February, the same level as January and deep below the 50 threshold that indicates no change in households’ situations.

And the economics consultancy’s outlook index, which focuses on where households think their finances are going, slid to 40.6, down from 42.8 the previous month. This suggests that however badly budgets have been hit, they still have a significant way to go.

“There was no let-up in the squeeze on UK household finances during February, as higher living costs and muted wage growth combined to reduce cash availability at the fastest pace since the middle of last year,” said Markit’s Tim Moore.

Moore pointed out that the Bank of England’s decision to allow inflation rise above target has impacted on household estimates of future price rises, according to Markit’s survey.

“Inflation expectations remain close to their highest since the survey began four years ago,” Moore said, “echoing recent warnings from the Bank that price pressures will remain elevated in 2013.”

And to top it off, the difficulties are impacting the worst-off the hardest, according to Markit.

The lowest quintile of earners saw the quickest deterioration in their finances for 14 months, according to the survey, whereas the highest saw the slowest tightening for a year.