Inflation drop eases squeeze on households

 
Tim Wallace
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HOUSEHOLD finances deteriorated in July at their slowest pace in four months, according to Markit’s household finance index published today.

The headline index rose from 37 in June to 37.5 in July – still firmly below the 50 “no change” level, but indicating a slowing of the decline.

Approximately 32 per cent of respondents reported their finances worsened in July, compared to seven per cent who signaled an improvement.

Falling inflation drove some of the improvement – the consumer price index rose 2.4 per cent in the year to June, its lowest rate since November 2009 – as inflation perceptions fell to their lowest since October 2010.

Looking ahead, the index measuring financial expectations rose from 42.8 in June to 43.1 in July – indicting the slowest pace of deterioration since April 2010.

But Markit urged caution, as the economy remains weak.

“Job insecurities and lower incomes are crimping underlying consumer demand, which adds to recent gloom over the wider UK economic outlook,” warned senior economist Tim Moore.