U.K. household financial expectations remain stable

The seasonally adjusted U.K. Household Finance Index (HFI) fell marginally to 44.8 in September from 44.9 in August. This hints at an ongoing financial strain, household perceptions continued to be quite less downbeat than the post-crisis trend. Financial pressures have been quite muted throughout this year, even in the face of June’s vote to leave the European Union, said Markit.

After recovering to 49.9 in August from 47.2 in July, the index gauging expectations for finances in twelve months’ time remained broadly stable near the 50.0 no-change mark in September. The recent reading of 49.6 indicated towards a slightly downbeat financial outlook. Sector wise, construction workers were most upbeat regarding their financial prospects. Manufacturing employees were comparatively optimistic. On the contrary, those working in finance/business services registered the bleakest outlook since May 2012.

Renewed growth of workplace activity was maintained in September. This was the second consecutive month of growth since July’s decline. The sharpest rise came in manufacturing, whereas retail was the only sector that saw a drop. Increasing activity helped in easing worries regarding job security for the second straight month. Income from employment was up for the sixth consecutive month in September. However, the pace of salary growth eased further and was the weakest in that sequence, noted Markit.

Both present and future inflation perceptions eased in September. Households showed that current price pressures were the weakest in six months, whereas expectations for living costs in 12 months’ time fell to the lowest since January.

The prospect of additional monetary policy easing seems to have lowered in September, according to U.K. households. About 25 percent of those surveyed project the central bank to lower the rate next. But just a small minority of consumers are projecting an imminent hike in base rate. Only 8 percent of respondents project higher interest rates before the end of 2016 and this just rises to 20 percent when the outlook period is extended to six months.

Instead, households are projecting tighter monetary policy in a longer term horizon. Around 38 percent expect a rise in the base rate in the next year. Over 55 percent see rates hiking in two years. Both percentages are the highest since the EU referendum, stated Markit.