Households are full of hope now inflation is falling

Tim Wallace
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Politicians are tiptoeing around the news that wages are growing faster than inflation – nobody wants to be first to say the cost of living crisis is over, after years of soaring prices.

But households themselves expect to feel better off over the next year, just in time for the election.

People don’t feel better off just yet, but Markit’s influential household finance index (HFI) found optimism for the future is surging.

The headline HFI came in at 43.1 in April, up from 41.9 in March and the highest level since the study began in 2009.

Any score of above 50 indicates finances improving.

But the real breakthrough is in households’ expectations for finances a year ahead – that index jumped from 49.1 last month to 51.9 this month, firmly smashing through the crucial 50-level.

“A long-awaited return to rising real wages is likely to boost consumer spending as we move through 2014, adding another piece to the jigsaw of the UK’s economic recovery,” said Markit economist Jack Kennedy.

It will take years for growing real wages to recover to pre-crash levels, but households are full of hope – even if George Osborne has to show excessive caution when celebrating the recovery.