21st January 2015
Households are feeling more optimistic about their finances than at any point in the past six years, a new poll reveals.
The Markit Household Finances Index for January found that consumer optimism is at a record-high since the survey began six years ago, as falling inflation has boosted financial wellbeing.
The strain on household finances continued to ease in January to the weakest level in the survey’s history as a result of consumers experiencing falling inflation, alongside slower declines in savings and cash available to spend.
Workplace activity rose for the thirty-second consecutive month in January.
Optimism was evident across all job sectors monitored by the survey, led by retail employees.
Activity growth was most pronounced in the manufacturing sector.
Income from employment rose fractionally in January, reversing the modest decline seen in the previous month. Meanwhile, the respective index measuring job security was little-changed since December and still above the survey average.
Lower inflation perceptions appeared to push back households’ expectations regarding the next rise in the Bank of England base rate.
The majority of UK households maintained a dovish view towards monetary policy in January, with just 9% anticipating a rise within the next three months.
This was the lowest proportion since August 2013, which was the first survey period following the MPC’s introduction of ‘forward guidance’. Less than one-third of survey participants (31%) forecast a rise in the first six months of the year, but 63% of households expect the base rate to increase from its historic low of 0.5% by the beginning of 2016.
Philip Leake, economist at Markit, said: “January was a record-breaking month for Markit’s HFI survey, with the squeeze on UK household finances easing to the weakest in six years of data collection. Similarly, optimism regarding the 12-month outlook for financial wellbeing reached a survey-record high at the start of 2015.
“Brighter assessments of current and future finances were reinforced by slower reductions in savings and cash available to spend, and by further growth of workplace activity.
“Improvements in financial wellbeing were underpinned by falling inflation perceptions. Households’ views on current and future prices were the most subdued in the survey’s history in January, helped by sharp reductions in fuel prices.
“With consumer price inflation hitting multi-year lows, households have pushed back their expectations regarding the next rate rise from the Bank of England, with less than one-third of respondents anticipating an increase in the first half of 2015.”