Households’ outlook for their finances is the weakest for almost two years amid heightened fears among young people.
he Markit Household Finance Index for February 2011 fell to its lowest level since March 2009, with around 34% of households seeing a worsening of their current finances. Just 5% reported an improvement.
Mortgage holders and public sector employees were particularly downbeat, with both categories seeing the fastest deterioration in finances since the survey began in February 2009.
Respondents in the 18-24 age category were also pessimistic, with expectations for their finances in the 12 months ahead the weakest, again, since the start of the survey. And cash available to spend generally declined at a survey record low.
Markit’s senior economist, Tim Moore, said: “Heightened pessimism among households threatens to subdue economic activity in early 2011 as rising job insecurity and worries about the financial outlook curtail consumer spending.
“An unhealthy combination of high inflation and job worries has caused households to report that their financial outlook has slumped back to the levels seen during the worst part of the recession in early 2009.
“With the pendulum swinging towards deeper government spending cuts, there are signs that people initially insulated from the downturn are now feeling the most strain.
“Lower income households have seen a particularly sharp squeeze on their disposable incomes,” he went on, “from the VAT rise and higher costs for basic items such as food and utilities, which typically represent a larger share of their expenditure than higher-earning households.
“With household necessities becoming increasingly expensive, the lowest income category saw the sharpest fall in their appetite for major purchases since the survey began in February 2009.”