April marked the first time this year that households reported a deterioration in financial circumstances according to the Markit household finance index released today.
Overall the index stood at 37.7 in April compared to 39.3 in March, significantly lower than the neutral level of 50. Anything below 50 signals a feeling of deterioration in household finances, while anything above signals an improvement.
Almost three quarters (73%) of UK households are not expecting any improvement in their finances during 2013, and of those questioned 42% said that they expected a deterioration in their financial circumstances across the same time period.
Those in the East of England and London where most optimistic about their financial circumstances, while those in the North East and North West were most pessimistic.
According to the index cash availability dropped in April, with 35% of household recording a fall in availability while only 10% recorded a rise in availability.
Tim Moore, Senior Economist at Markit and author of the report said:
“April’s survey highlights a deepening downturn in financial wellbeing, driven by renewed pressures on household income and another strong rise in living costs. The worsening financial environment stood in contrast to reports from households of increased workplace activity and relatively subdued concerns about job security, especially among those in the private sector.
There was a renewed downturn in income taken from employment, influenced in chief by a reported fall in income for those working in the public sector. Those working in the private sector reported a moderate overall rise in income taken from employment.
According to Labour Market Statistics released by the Office for National Statistics last week, average total pay rose by 0.8% in the 3 months leading up to December 2013, the lowest rise in a quarter since September-December 2009.
Commenting on the Household finance index, Moore said:
“With first quarter GDP set to take centre-stage later this week, this survey provides a timely reminder that triple-dip or no triple-dip, there has been little alleviation of the strain on households’ financial wellbeing so far this year. Moreover, with incomes failing to keep pace with living costs, household finance constraints are likely to act as a further drag on consumer spending over the months ahead.”