HOUSEHOLDS’ views of their financial well-being have deteriorated at the sharpest pace for nearly a year this month amid Brexit uncertainty, while perceptions of job security have continued to worsen, a key survey shows.
Information and analytics group IHS Markit, publishing the survey results yesterday, warned that Brexit uncertainty continued to pose a “notable risk” to the UK economy.
The survey signals UK households are at their most pessimistic about job security since January last year. Perceptions of job security have now worsened for four consecutive months.
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IHS Markit’s household finance index (HFI), which measures overall perceptions of financial well-being, dropped from 44.7 in January to 43.4 in February on a seasonally adjusted basis. This signals the steepest deterioration of current financial wellbeing among households since March last year.
The survey also signals households are now more pessimistic than they were in January about their finances over the coming 12 months.
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IHS Markit notes that data split by type of employment signals that households with employment in the manufacturing sector are the most downbeat. Households dependent on the retail sector for employment are the second-most pessimistic about the outlook for finances.
UK households have continued to report higher living expenses this month, with the rate of increase stronger than in January.
Meanwhile, the survey shows that around one in eight households now foresee the next move in benchmark UK interest rates by the Bank of England being a cut rather than a rise. The 13 per cent forecasting the next move will be a reduction is the highest proportion since December 2016 foreseeing such a scenario. The proportion of households predicting a rise in rates within the next six months has fallen to 46%, its lowest since last June.
Figures published last week by the Office for National Statistics showed UK gross domestic product growth slowed sharply in the final three months of last year, to just 0.2% quarter-on-quarter.
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Joe Hayes, economist at IHS Markit, said: “With the latest official GDP figures revealing slowing growth momentum in the UK, latest survey data from UK households revealed the sharpest deterioration in current financial well-being in almost
one year, highlighting the headwinds that fragile consumer finances present to the wider economy.”
He added: “The HFI survey also pointed to greater pessimism towards financial conditions over the coming 12 months. The... survey also signals that the improvement in real earnings growth, which has been driven by higher nominal pay and softer [annual consumer prices index] inflation, may not necessarily translate into boosted spending by UK consumers. The impact on confidence caused by Brexit uncertainty continues to pose a notable risk to the domestic economy, also highlighted by job security perceptions becoming increasingly negative in February.”
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Separately, UK manufacturers say the lack of certainty ahead of the March 29 Brexit date is having a severe impact on their ability to plan for the future, according to the latest annual report on the sector published yesterday by Hennik Research.
The report warns that the Government’s handling of Brexit, a national shortage of technical skills and a lack of public awareness of the importance of manufacturing are the key issues of concern for UK producers.
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