Households in Britain have become more worried about the outlook for their finances in the 12 months ahead as rising inflation puts a squeeze on their spending power, a new survey shows.
IHS Markit said its index measuring how households feel about their personal finances fell to 45.8 in June from 47.1 in May, the most pessimistic in three months and one of the lowest readings since the end of 2013.
The firm’s overall Household Finance Index, measuring how UK people feel about their current situation, rose to 43.8 from 42.6 but remained below the 50 point no-change level.
Britain’s main measure of inflation hit 2.9% in May, its highest level in nearly four years after last year’s Brexit vote hammered the value of the pound, and growth in wages is lagging behind, official data showed last week.
That is eating into the spending power of consumers who typically drive British economic growth.
“June’s survey reveals that UK household finances remain under intense pressure from rising living costs,” said Tim Moore, senior economist at IHS Markit.
“While the squeeze moderated slightly since last month, worries about the outlook have deepened.”
The survey also showed 58% of respondents expected higher interest rates in 12 months time, more than double the figure seen after the Bank of England cut interest rates last August following the Brexit vote.
The Bank kept rates at their record low of 0.25% last week but three members of its eight-strong Monetary Policy Committee voted for a rate hike, surprising investors and raising speculation that an increase in borrowing costs might come sooner than previously expected.
Meanwhile, asking prices for British houses and apartments fell in June, the first decline in the month since 2009, led by drops in the London area as wage growth slowed and political uncertainty rose, property website Rightmove said.
The figures are based on property advertised between May 14 and June 10, covering mostly the final weeks before the June 8 national election which saw Prime Minister Theresa May unexpectedly lose her parliamentary majority.
Rightmove said average asking prices for property sold on its website dropped 0.4% in June, normally a month which sees a seasonal rise, after rising 1.2% in May.
“The price of property coming to the market had increased in June in every year since 2009, so buyers’ confidence has clearly been affected by inflation outstripping their pay packets and current political events,” Rightmove director Miles Shipside said.
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