UK households’ financial optimism hits six-month high
UK households have struck an optimistic note on their future finances for the second month in a row, to mark a six-month high in their outlook.
Financial health expectations moved up a gear in July after households recorded their first positive outlook since the start of 2019 in June.
Read more: UK households turn positive on future finances for the first time in eight months
Households’ perception of financial wellbeing hit a score of 44.3 on IHS Markit’s survey, released today, slightly up from 43.9 in June.
“Against the challenging UK economic backdrop and heightened political uncertainty, households signalled a cautious level of optimism towards their future finances in July,” Joe Hayes, an economist at IHS Markit, said.
“UK households continued to signal decent growth of incomes from employment, which corroborates with what recent ONS data has shown and is a positive indication for consumer spending this summer.”
The UK’s robust labour market proved a major factor in boosting households’ confidence in the economy, IHS Markit said, calling it a “key driving force”.
Britain’s unemployment rate is at a 45-year record low according to the most recent public data available, while wages are growing at their fastest rate since the financial crisis.
Salaries rose at their fastest rate for three months in July, IHS Markit said.
But people are still concerned about their job security, today’s survey found.
“UK households continued to signal decent growth of incomes from employment,” Hayes said. “Concerns towards job security do linger however, which may be holding back big-ticket purchases.”
Households still expect the Bank of England to hike the interest rate despite the looming risk of a no-deal Brexit in October.
Read more: Will the Bank of England raise or cut interest rates?
Three-quarters of households believe interest rates will rise within the next two years, though 16 per cent predicted an interest rate cut – the highest percentage of respondents in two-and-a-half years.
“There were some noteworthy developments in interest rate expectations in July, as the proportion of UK households predicting the next move by the Bank of England to be a cut rose to its highest in over two-and-a-half years,” Hayes said.
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