Households Feeling More Confident About Finances

July 25, 2013

Luke-Notley small (Custom)Consumers are feeling more upbeat about finances than they have for about four and a half years, according to a new survey.

The survey, conducted by financial information company Markit, found that the worst may be over for families following increasing house prices and improvement in working conditions.

While over one quarter of people reported their budgets worsened in July, nearly one in 10 saw an improvement, the survey said.

The overall reading of 41.5 indicated the strongest household sentiment seen since the survey started in February 2009. The reading is still negative, with reading above 50 indicating that households’ finances are improving and those below 50 showing deterioration; however, according to Markit, improvements have been reported in four of the last five months.

Signs of growing confidence among home owners and rising incomes from employment have helped to create a “brightening picture”, according to the survey. This is despite the fact that the findings come at a time when inflation has surged to a 14-month high, creating extra pressure on families.

Of the 1,500 people Markit spoke to 27 per cent believe their financial situation will improve over the next 12 months, while 37 per cent expect it to worsen. This shows the least negative outlook since March 2010.

House prices have increased more than expected this year, following the introduction of government schemes that have made mortgages a lot more accessible.

Because there are more people making the jump on to the property ladder, there has also been signs that the pressure is easing on the rental sector following a period of strong rental increases.

Private sector workers reported the most dramatic increase in income levels since the survey started, while public sector workers were still downbeat.

People working in finance and business and IT and telecoms were the most optimistic, while construction workers were negative about their situation.

Tim Moore, senior economist at Markit, said signs of  recovery across the UK economy and a corresponding improvement in workplace conditions were key factors in reducing the strain on household budgets.

“While higher property values may have supported household finance sentiment among home owners, there was evidence to suggest that this summer’s brightening picture is not solely a reflection of rising prices for bricks and mortar,” he said.

“Increased income from employment during July, alongside a much less downbeat assessment of financial well-being among people in the private rental sector, highlighted a broad change of momentum.”

A separate survey released by Lloyds TSB had similar findings to Markit’s, showing consumer sentiment reached a new high of 112 points in June.

The figure was the highest since the survey began in November 2010.

According to Lloyds TSB, pessimism over the housing market and employment situation also declined though the mood remained downbeat, while annual growth in spending on essential items stabilised at around 2.5 per cent, which is broadly in line with inflation on those items.

Despite this, pressure on families remained, with 78 per cent saying they were concerned about the increasing price of utility bills and 74 per cent worried about the cost of food.