UK households still gloomy about finances, but see brighter future

British households have shrugged off concerns about the wider economy to be the most upbeat about their financial futures for nearly four years.

The IHS Markit Household Finance Index, which measures households’ overall perceptions of financial wellbeing, fell to 44.5 in November from the prior month's 45. It was the lowest reading since June, as households took a cautious view of their current situation.

Spending also eased to a 15-month low, with households becoming more downbeat about job security, especially those working in manufacturing.

But despite this, respondents reported growing confidence in the future. Expectations for the next 12 months came in at 52, up from 48.6 in October, with the degree of positivity signalled the strongest since the start of 2015.

Helping to underpin household optimism were stable living costs, which rose at the slowest rate in just over two years.

Joe Hayes, economist at IHS Markit, said: “Households still deem current financial conditions to be skewed to the downside. Expectations are for a rebound, however, with projections towards financial wellbeing over the coming year at their most optimistic since 2015.

“Income from employment continued to grow, while workplace activity was reported to have risen solidly. As such, perceptions toward the labour market seem robust. Living cost inflation has also continued to ease, which should provide UK households with a purchasing boost as holidays approach.

“Indeed, with official data showing that UK wage growth is close to a decade-high, and if positive trends in the Household Finance Index data for incomes and inflation can be sustained, sentiment towards current finances should lift as we enter 2019.”