Caution over major purchases as uncertainty dents UK economy
Consumer appetite for major purchases fell at the second-fastest rate in almost two years during August, as Brexit uncertainty and fears of an economic slowdown held back spending.
IHS Markit’s monthly household finance index dipped to a three-month low after reporting the second-sharpest drop in demand for major purchases since September 2017.
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The headline index from the survey – which measures households’ overall perceptions of financial wellbeing – recorded 43.7 in August, falling from July’s 44.3 and “signalling a stronger degree of pessimism towards current finances by UK households”, the report said.
Having been in positive territory during June and July, UK households signalled a negative outlook towards their financial health for the year ahead in August.
Pessimism towards job security remained, with UK households posting the strongest degree of negativity since March.
Income from employment continued to rise. However, the expansion slowed to a modest pace which was the weakest in five months.
“Latest survey data continued to highlight a fragile state among UK households towards their financial wellbeing,” according to Joe Hayes, an economist at IHS Markit.
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Hayes said: “The Brexit haze, uncertainty over the political environment and the increased possibility of the UK entering recession appear to have dented expectations, which dipped into negative territory following positive readings in both June and July.”
He added: “A sharp decline in appetite for major purchases was also signalled, while pessimism towards job security also intensified during August, explaining why UK households have withdrawn into a more risk-averse approach and subsequently tapered their expectations for the coming year.”