UK still on solid recovery path says Markit

19th March 2014

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Confidence among UK households about their finances has fallen slightly this month according to the Markit Household Finance Index though it is still much higher than the typical levels of confidence seen since the survey began in 2009.

At 41.9 in March, the seasonally adjusted Markit Household Finance Index (HFI) was down only slightly from a survey-record high of 42.1 in February.

The latest figure – which measures overall perceptions of financial wellbeing – was the second-highest since the series began in February 2009, which Markit says signals that pressures on household finances remained much less marked than seen on average over the past five years.

Household finances were supported by a rise in income from employment for the fourth month running during March, while inflation perceptions dipped to the lowest since December 2009.

As a result, cash availability fell at the slowest pace since last August and household debt levels were reduced for the third time in the past four months. Stronger economic conditions, as highlighted by a robust rise in workplace activity, contributed to a moderate rebound in household spending during March.

Markit says the seasonally adjusted index measuring the outlook for financial wellbeing over the next 12 months posted 49.0 in March, down from a survey-record high of 50.5 in February. Nonetheless, the latest reading was the second-highest since the series began in February 2009.

By job category, people working in IT/Telecoms were the most optimistic in March, followed by those working in manufacturing. Across the private sector as a whole, expectations for year-ahead household finances hit a survey-record high in March.

At 55.0 in March, the seasonally adjusted index measuring workplace activity picked up from 54.1 in February and remained well above the neutral 50.0 threshold. The average reading for Q1 2014 as a whole (54.7) signalled a broadly similar rate of expansion as that recorded in the final quarter of 2013 (54.8).

Higher levels of workplace activity contributed to a marginal rise in pay levels, as highlighted by the seasonally adjusted income from employment index posting 50.9 in March.

Meanwhile, at 45.9 in March, the seasonally adjusted job security index dipped only slightly from February’s survey-record high (46.9).

Adjusted for seasonal influences, the index measuring household spending picked up to a three-month high of 52.1 in March, thereby suggesting a rebound in spending from February’s adverse weather-related slowdown (49.2).

March data pointed to a further marked fall in households’ current inflation perceptions. At 75.8, down from 77.7 in the previous month, the seasonally adjusted index was the lowest since December 2009.

Meanwhile the seasonally adjusted index measuring expected living costs over the year ahead dipped from 91.2 to 89.2 in March, its lowest level since April 2010.

Tim Moore, senior economist at Markit, says: “March’s survey was compiled just ahead of the UK Budget and it highlights that the squeeze on household finances is less acute than at almost any other time over the past five years. Meanwhile, improvements in domestic economic conditions continue to support expectations of future financial wellbeing, with this index also staying close to February’s five-year peak.

“Inflation perceptions were the lowest since the end of 2009, while higher income from employment has now been recorded for four months in a row. Further positive signals during March were an accelerated rise in workplace activity and a rebound in household spending levels. Overall, the survey suggests that the UK economy has remained on a solid recovery path during the first quarter of 2014.”

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