UK households are at their most pessimistic since November 2013 about the prospects for their finances, against a backdrop of surging inflation and subdued pay rises, a survey shows.
IHS Markit, publishing its monthly household finance survey, warned the latest findings provided an “advance warning” that stretched household budgets will weigh on consumer spending in coming months.
The IHS Markit index measuring households’ expectations for their finances in 12 months’ time tumbled from 48.1 in February to 45.3 in March, its lowest since November 2013, on a seasonally-adjusted basis.
The survey showed households had this month recorded the second-fastest increase in living costs since July 2013.
And survey respondents signalled income from employment was broadly unchanged in March.
Figures published by the Office for National Statistics on Tuesday showed annual UK consumer prices index inflation surged from 1.8 per cent in January to 2.3 per cent in February, overtaking the latest official rate of earnings growth to signal a real-terms fall in pay ONS data last week put annual pay growth in the UK in the three months to January at 2.2 per cent.
Tim Moore, senior economist at IHS Markit, said: “A combination of rising inflation and subdued pay trends has forced households to recalibrate their expectations for the year ahead. After holding steady last summer, UK consumers are now more downbeat about their financial outlook than at any time since late 2013.”
He added: “Our latest survey provides an advance warning that stretched household finances will become a greater drag on consumer spending in the months ahead.”
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