Although not entirely unexpected, the latest household finance index from Markit Economics makes for some sobering reading.
The latest Markit Household Finance Index™ (HFI™) for August shows that, despite people being a little more optimistic about the future than they were in July, the HFI fell for the 3rd consecutive month and that it is, at 33.2, at its lowest since the survey started in Feb 2009.
Consider that an index of 50 means no change and that the higher the number is the better the situation.
The survey, which collected data from about 1,500 individuals between 10th-14th August, also shows that there have been accelerated falls in savings, income and cash available to spend as well as the biggest increase in the levels of debt for the past nine months.
Senior Economist at Markit, Tim Moore, said ‘Recent events have made a week seem a long time in economics and August’s survey is the first sign that the slew of downbeat headlines has knocked consumer sentiment. Households reported the sharpest deterioration in their finances since the survey began, exceeding even that seen during the worst point of the recession.’
Only 9% of those surveyed were able to save more and 34% reported a drop in their savings. And debt levels increased amongst 22% of respondents and only fell for 17%.
As a result 50% of people would be less willing to make a major purchase.
24% of people also thought their property value had dropped as opposed to 7% who thought it had risen.
Job insecurity and reduced income also contributed to the continued possimistic feeling amongst households.
“Looking further ahead, households were slightly less downbeat about the 12 month outlook for their finances in August. However, the overall findings of the survey suggest little in the way of a springboard for consumption growth in the year ahead. As a result, it is likely that the UK economy will be increasingly dependent on external demand to drive the recovery.” Said Tim Moore.
With the Eurozone and the US both in debt fuelled meltdowns and China looking as though it may scale back, it is hard to see where this external demand is going to come from.