Pay Returned to Growth in October as Households Continued to Pay Down Debt

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

• The HFI rose slightly 39.9 in October from 39.5 in September.
• Around 28% of respondents saw their household financial situation worsen in October, compared to just 8% that reported an improvement.
• Household finances deteriorated across all twelve UK regions, with those in Wales and the North West registering the sharpest rates of decline.
• For the first time since the survey began, households grew more pessimistic about the one-year outlook for their finances.
• Income from employment rose for the first time in the survey history, linked to a second successive monthly increase in workplace activity. Public sector workers reported a far stronger rise in activity than their counterparts in the private sector. Manufacturing, construction and IT/telecoms employees continued to see their incomes fall.
• Overall household spending fell marginally during the month as households concentrated on paying down debt, which also helped reduce household savings. Private sector employees saw the sharpest drop in spending, led by construction workers.
• Respondents perceived a rise in the values of their own homes for only the second month running in October. Looking ahead, some 43% expect property values to be higher in a year’s time against just 15% expecting a decline. Northern Ireland, the South East and Scotland are expected to see the strongest house price growth over the coming year.
• Perceptions of current inflation fell to the lowest for seven months. However, some 71% of respondents expect inflation to be higher in twelve months’ time compared to only 6% expecting it to be lower.

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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