Inflation pressures remain on Briitsh households as living costs rise at fastest pace in a year

Living costs for Britons rose at the fastest pace in a year in February as the inflationary pressure continues to squeeze household finances, according to a closely followed survey.

UK households’ finances deteriorated at the fastest space since July, according to IHS Markit, with its index falling to 42.2 from 42.9 in January, well below both the 50 no-change mark and the last peak reading above 46 at the start of 2015.

The Bank of England’s top policymakers this month said they believe inflation’s negative effects on citizens’ wallets have passed their peak. However, the survey, based on over 1,500 responses found continued evidence of “strong inflationary pressures”, as cash available fell at its fastest pace in 10 months.

Read more: Inflation expectations at highest in 47 months

British households remained downbeat about their financial prospects for the year ahead, with a “sharp drop in households’ appetite for major purchases” in February, which hit its lowest point since July 2017.

Tim Moore, associate director at IHS Markit, said: “The latest survey adds to evidence that UK households have seen an erosion of their financial wellbeing so far this year, with stubbornly high inflation the main factor placing pressure on consumer budgets.”

The Bank of England’s hawkish response to the rise in inflation – which has prompted a big move in market bets on another interest rate hike in May – has also left households bracing for tighter monetary policy.

IHS Markit’s survey showed 60 per cent of households expected a rate rise in the next six months, a steep rise from the 45 per cent who expected it in January.

Read more: Inflation hit costs British households £24bn in 2017