Household finances deteriorate faster than at height of UK recession
- Published on Monday, 22 August 2011 10:28
- Posted by Scott Buckler
Household finances are deteriorating faster than during the height of the UK recession in early 2009: almost 40% of households saw their finances deteriorate between July and August, compared to just under 6% that recorded an improvement
Key points for August:
• HFI falls for third month running in August to its lowest since start of survey in February 2009
• Fastest fall in cash available to spend since survey began
• Steepest reduction in savings for almost two-and-a-half years in part reflecting a drop in income from employment
• Debt levels increased for the fifth month running and at the fastest pace since November 2010
• Survey hints at a north-south split across the English regions in August
• Largest rise in debt levels for nine months
• Future house price index was below the neutral 50.0 mark for the first time in three months.
• However households’ assessment of future finances slightly less downbeat than in July
Tim Moore, Senior Economist at Markit said:
“Recent events have made a week seem a long time in economics and August’s survey is the first sign that the slew of downbeat headlines has knocked consumer sentiment. Households reported the sharpest deterioration in their finances since the survey began, exceeding even that seen during the worst point of the recession.
“With a global economic slowdown and an escalating eurozone debt crisis lapping on the shores, it was unsurprising to see households’ appetite for major purchases reverting back to its lowest since the start of the year.
“August also saw the steepest drop in take-home pay for nine months, and this reduced income was then squeezed further by rising prices. As a result, household savings and cash available to spend both fell at the fastest rates in the survey’s two-and-a-half year history.
“This squeeze on consumer purchasing power is unlikely to abate in the near-term, with the Bank of England expecting inflation to reach 5% later this year as higher utility and oil-related prices filter through to household budgets. With consumer spending accounting for around two-thirds of UK gross domestic product, this does not bode well for the economy in the second half of the year.
“Looking further ahead, households were slightly less downbeat about the 12 month outlook for their finances in August. However, the overall findings of the survey suggest little in the way of a springboard for consumption growth in the year ahead. As a result, it is likely that the UK economy will be increasingly dependent on external demand to drive the recovery.”