Tightest squeeze on income since 2009

Julian Harris
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BRITONS’ incomes faced their tightest squeeze in two and a half years in July, as the rising cost of living and high personal debt weighed down on household budgets.

Over a third (38 per cent) of people reported a deterioration in their household’s finances compared to just a month earlier, according to a poll by Markit and Ipsos Mori released this morning.

Only six per cent reported an improvement in their finances, as the Markit household finance index dropped from 35.1 to 34.4 – signalling the harshest decline in finances since March 2009.

“The mood among British households has been as gloomy as the weather this summer,” said Markit’s senior economist Tim Moore. “The current household finance index is now just as low as the survey record seen in early 2009.”

Yet respondents were less downbeat about future prospects, believing that the decline in economic wellbeing could be about to slow.

The sub-index measuring the outlook for the next 12 months rose to 38.8, up from 34.6.

Yet the forward-looking index still remains below 50, indicating more tightening of finances to come.

Nearly half (49 per cent) of households expect their finances to deteriorate in 12 months’ time. A little over a quarter (27 per cent) are upbeat, forecasting an improvement in their financial situation.

“People are more hopeful of the skies brightening in the months ahead, although fragile economic conditions and the prospect of rising household bills are headwinds that could easily knock confidence again,” Moore added.

Inflation expectations relaxed in the July survey, yet remain “higher than seen throughout 2009 and 2010.” Around four in five respondents reported higher prices than a month earlier, while 88 per cent anticipate rising prices over the coming 12 months.

There was some sign of a turnaround in the employment data, with job security hitting its highest index score since May 2010, while the fall in income from employment slowed.