UK households’ perceptions of their financial wellbeing rose to their highest ever levels this month in a sign of growing optimism over the UK’s economic prospects.
IHS Markit’s UK Household Finance Index (HFI) – which measures households’ overall perceptions of financial wellbeing – increased to 47.6 in February, up from 44.6 in January.
Although the index remains below the neutral 50.0 mark, meaning that people’s financial health remains under pressure, the rise suggests the conditions faced by UK households has become less challenging so far in 2020.
The Future Household Finance Index – which measures expected change in financial health over the next 12 months – also rose to 52.7 in February, from 49.6 last month, in a further sign of the UK’s positive outlook.
Joe Hayes, an economist at IHS Markit, said: “[There are] a number of developments that should keep the Bank of England doves at bay and build optimism towards the UK’s immediate economic prospects”.
He added: “Post-election survey data so far scores a fairly good chance a first quarter GDP pickup following a flat end to 2019”.
The survey showed that a falling rate of living cost inflation in February helped alleviate pressure on people’s finances, whilst perceptions of house prices rose at their strongest rate in three years.
UK households recorded a lessened degree of pessimism towards their job security during February, with the index rising (but remaining below 50.0) to a seven-month high.
Meanwhile, the rate of growth in both workplace activity and income from employment accelerated from January.
Last week the outgoing governor of the Bank of England (BoE) said that there had been a bounce in business confidence since December’s election and “to some extent a firming of consumer confidence”.
Johnson’s overwhelming victory at the polls ended three years of uncertainty over whether Britain would leave the European Union on 31 January.
Mark Futcher, head of workplace wealth at Barnett Waddingham commented: “It’s a breath of fresh air to see financial wellbeing at survey-record high. In the post-election and post-Brexit environment, people are standing on steadier ground for their financial future”.
The proportion of respondents expecting the Bank of England to cut interest rates also rose to 27 per cent, its highest since August 2016, when the bank last cut rates.