Inflation puts strain on UK households

THE rapid pace of inflation means that British households are still feeling the strain almost two months after the country officially emerged from recession, a survey revealed yesterday.

Markit/YouGov data showed that UK consumer finances worsened again in February, partly because income levels were unable to keep pace with increases in prices for goods and services.

Almost 60 per cent of UK households reported a rise in the general prices for goods and services bought in February. In terms of the outlook for the next 12 months, a third of households were pessimistic about their personal finances.

Tim Moore, economist at Markit, said: “February’s survey highlights that UK household finances are still deteriorating, despite the recession officially ending last year.

“This mostly reflected a combination of stalling incomes and rising inflation perceptions.

“With household spending falling again, the latest data suggest that weak final domestic demand could limit the recovery in the wider economy.”

Although the UK economy managed to grow in the fourth quarter, there are concerns that weak consumption combined with tighter policy could prompt a return to recession.

The February data showed a drop in households’ confidence in the government’s management of the economy.

British households also think that the Conservatives, if elected, would be most able to improve their finances. Almost a third (27 per cent) thought a Tory government would be the most beneficial for their financial position compared to 21 per cent for Labour and eight per cent for the Liberal Democrats.

Respondents gave the Conservative Party’s focus on cutting the national debt and reining in public sector spending as reasons for preferring the Tories.