U.K. household finance index remains steady in October, inflation expectations remain higher

Household finances in the United Kingdom remained stagnant during the month of October, while higher inflation expectations contributed towards the worst financial outlook in three years.

The degree of financial strain on UK households was unchanged in November, as shown by the seasonally adjusted Household Finance Index (HFI) holding steady at October’s reading of 43.7. Though subdued relative to the post-crisis trend (40.1), the latest figure signaled a stronger downturn than on average in 2016 (44.2).

Inflationary perceptions regarding both current and future living costs were at least partly behind financial pressures. Households’ current price perceptions surged to a near two-and-a-half year high. Stronger price pressures contributed to a downbeat outlook among UK households.

The seasonally adjusted index measuring expectations for finances in 12 months’ time dropped for a third straight month to a three-year low of 45.3 in November. Down from 47.9 in October, the index pointed to a negative financial outlook for the eighth month in succession.

The seasonally adjusted index measuring current inflation perceptions increased sharply to a 29- month high of 75.1 in November. The index rose a record 7.4 points since October (67.7). The index for expected living costs was also up in November, rising from 83.5 in October to 86.0 (the highest in over two years).

Meanwhile, with price pressures mounting, UK households appear to have grown more hawkish regarding the next move in the Bank of England base rate. Just 17 percent of respondents expect interest rates to fall further from their current low of 0.25 percent, down from 27 percent in October.

"UK households signalled the worst financial outlook for three years in November, with inflation expectations picking up to the highest since late- 2014," said Philip Leake, Economist, IHS Markit.

The FTSE 100 traded 0.16 percent lower at 6,782 by 10:30 GMT. While at 09:00 GMT, the FxWirePro's Hourly GBP Strength Index stood neutral at 22.23 (higher than +75 represents purely bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

The yield on the benchmark 10-year gilts, which moves inversely to its price, rose 4-1/2 basis points to 1.425 percent, the super-long 30-year bond yield jumped 4 basis points to 2.055 percent and the yield on short-term 2-year climbed 2 basis points to 0.224 percent by 10:30 GMT.