Household Finances Weaker as Pessimism about the Future Continues to Recede

The latest Markit/YouGov Household Finance Index (HFI), which tracks month-on-month changes in household finances, was released today.

• The HFI fell slightly to 38.2 in August, from 38.5 in July.
• Around 30% of respondents saw their household financial situation deteriorate in August, compared to just 6% that reported an improvement.
• Household finances deteriorated across all twelve UK regions. The steepest rate of decline was in Northern Ireland, the gentlest in London.
• There was a slight reduction of actual household spending in August, despite a sharp drop in cash available to spend. 30% of respondents reported a reduction in household savings compared to 10% who indicated a rise.
• The outlook for household finances in 12 months’ time improved further in August. The index rose to 45.0 from 42.0 in the previous month, its highest level since the survey began in February.
• Confidence in the government’s management of the economy saw marked declines. Around 49% of households had become less confident since July in the government’s handling of the economy. Less than 6% indicated they had become more confident. All age ranges, income groups and UK regions reported reduced confidence.

Data: Markit Economics [PDF]

Note: The HFI is a “diffusion index”, it is calculated by adding together the percentage of respondents that reported an improvement plus half of the percentage that reported no change. Results will vary around the 50.0 “no-change” level. Readings above 50.0 signal an improvement, readings below 50.0 a deterioration.

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