A survey released today has found that although family finances are still under pressure household optimism has grown to its highest levels in 4 and a half years.
The survey, carried out by financial information company Markit, found that UK households are increasingly optimistic about their future employment prospects, wages and house prices. The overall confidence rating of 41.5 is the strongest since the survey began in February 2009. Readings above 50 indicate that families’ finances are improving, while anything below 50 shows deterioration.
Although this reading is still negative, improvements have been recorded in 4 out of the last 5 months; 27% believe that their finances will improve over the next 12 months, while 37% expect them to worsen.
People’s confidence levels varied depending on their area of work; private sector workers were generally optimistic, and reported the most marked rise in income levels since the survey began, whereas public sector workers were still fairly pessimistic. Workers in finance, business and IT were the most upbeat, with construction workers reporting the lowest confidence in their financial prospects.
Tim Moore, senior economist at Markit and the report’s author, said:
“It's not just the weather that has taken a turn for the better in July,” adding that “increased income from employment during July, alongside a much less downbeat assessment of financial wellbeing among people in the private rental sector, highlighted a broad change of momentum”.
However, ASDA’s monthly income tracker showed that, although families appeared increasingly confident, their spending power remained unchanged year-on-year in July due to inflation and persistently low wage growth.
The consumer group Which? also warned that we are not out of the woods yet, and that consumers may be endangering their long-term prospects by relying on credit to get by. Executive director Richard Lloyd said:
“Consumers may be aiding our fragile economic recovery, but using savings and getting into debt is not sustainable. The government must do more to keep spiralling housing, food and energy prices in check.”