U.K. household’s financial wellbeing deteriorates sharply in January, inflation expectations surge

U.K. household financial wellbeing took the most rapid downturn for four months in January. The seasonally adjusted Household Finance Index dropped to 43 in January from December’s 43.7. The latest reading hinted at a sharp squeeze on household finances and was the lowest since September 2017. In spite of a modest rise in income, households continued to utilize unsecured borrowing to bridge the gap between dropping current account balances and rising spending. Furthermore, the need for unsecured debt increased at the most rapid rate for 11 months in January.

The latest data showed that higher living costs continue to be a main factor behind the household finance squeeze. The balance of respondents recording increased prices for goods and services was less marked than the peak seen in the preceding survey, but still among the highest since 2013.

Households in the U.K. continued to be downbeat regarding their financial prospects in the next year, which continues the trend seen since April 2016. In response to weak consumer finances, appetite for major purchases dropped at the sharpest rate since September 2017.

The seasonally adjusted index of workplace activity rose in January to 54. People employed in Finance/Business services were the most positive in January. In spite of the positive picture in terms of workplace activity, the most recent data hinted at the sharpest deterioration in job security for six months.

The index gauging cost of living expectations reached 91.3 in January, signaling the most robust inflation expectations in 47 months. Price pressures faced by U.K. household continued to be sharp and well above average in the latest survey. However, the seasonally adjusted current living costs index eased slightly to 83.3 in January from 83.5.

At 13:00 GMT the FxWirePro's Hourly Strength Index of British Pound was highly bullish 120.451, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 34.9481. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest