UK household finances improve on higher income, low inflation

The United Kingdom’s household finances index rose in June on the back of rising income and employment. Further, low inflation has also kept consumer spending loose, which added to the higher reading of the index.

The UK Household Finance Index rose to 44.9 in June from 42.3 in May, financial data released by Markit showed Wednesday. The HFI is calculated by Markit every month, compiling data collected by Ipsos MORI. Though still below the crucial 50-point mark, the latest figure was above the average of 44.4 recorded so far this year, Markit reported. However, spending rose at the sharpest rate in nearly a year’s time, the report showed.

Further, income from employment increased in June. The rate of salary growth quickened to a 14-month high, helped by an ongoing rise in the private sector. With activity growth picking up and income rising at a sharper pace, worries about job security eased in June. The respective index was at its highest level of 2016 so far, but still pointed to negative sentiment overall.

"That said, households' financial projections were downbeat on average for the third month running - the longest sequence of pessimism since September 2014," said Philip Leake, Economist, Markit.

Meanwhile, the proportion of households forecasting a rate hike in the next six months rose to 27 percent, up from 22 percent in May, and 52 percent expected a hike in the next 12 months. British economic growth lost pace in the first three months of 2016 and is expected to slow further in the April-June period as uncertainty about the outcome of the EU referendum weighs on investor sentiments.