Strain on household finances intensifies in August

The seasonally-adjusted IHS Markit UK Household Finance Index, which measures households’ overall perceptions of financial wellbeing, fell from 41.5 in July to 40.8 in August.

Households in the UK also remained highly pessimistic of their financial wellbeing over the coming 12 months, the research shows.

The August data highlighted another reduction in income received from employment, with the latest decline sharp, despite easing further from May’s record drop. The survey measure of job security perceptions was also negative amid the ongoing Covid-19 pandemic and a substantial number of redundancies.

The data also reveals that 62.6% of people expect interest rates to increase by August 2022. This was slightly down from July’s 65.3%, whereas the proportion who anticipate higher interest rates within the next year was broadly unchanged at 48.9%. Meanwhile, despite the record low Bank of England base rate at present, 20.9% of UK households surveyed in August predict another rate cut at some time.

Lewis Cooper, economist at IHS Markit, which compiles the survey, said: “Overall, the data hint at some worrying trends when put in the context of the significant recession facing the UK. Although lockdown measures are looser; households are spending less, earning less and unsure about their jobs, all of which has the ability to add severe friction to the pace of the economic recovery.”