Household finances squeeze 'weaker'

The squeeze on household finances has loosened its grip to stand at its weakest for 20 months, a study has said.

The Markit household finance index rose for the third month running in August to 38.9, signalling the slowest deterioration of household finances since December 2010, although the general trend is still a negative one.

Households were also the least pessimistic about the prospects for their finances for the coming year since March 2010.

Around 42% of households predict their finances will deteriorate over the next 12 months, compared with 29% expecting an improvement.

People working in the manufacturing and construction sectors tended to be particularly downbeat about their financial outlook.

In terms of income expectations for the year ahead, around 39% of private sector employees expect a pay rise in the next 12 months, compared with just under 25% of public sector workers.

IT and telecoms workers tended to be the most positive about the prospects for their pay packets in the coming months, while construction employees were the most downbeat.

Just under 30% of people surveyed saw their finances worsen in August, while fewer than 8% reported an improvement.

The study said the strain on people's pockets had been eased by a stabilisation of debt levels, recent falls in inflation despite some surprise increases seen last week and reduced levels of people feeling insecure about their jobs.

Households' income from employment declined at the slowest pace since July 2011 and people working in the private sector in particular saw a stabilisation in their wages, although incomes fell in the public sector for the 22nd month in a row. Smaller reductions in people's wages helped people to get to grips with their debts, ending a 16-month period of debts increasing.