Lower inflation boosts UK households’ morale

New survey shows households feeling more optimistic about the economy

British households feel under the least financial pressure in more than five years, due to lower inflation and the prospect of higher wages, a monthly survey showed on Wednesday.

Financial data company Markit said its Household Finance Index rose to 43.1 in April from 41.9 in March, reaching its highest level since the survey started in February 2009.

While the index has risen markedly over the past few months, the mood was still pessimistic overall, with any reading below 50 representing households feeling worse off.

The survey came out a day after official data showed that consumer price inflation sank to a four-year low of 1.6 percent in March. Markit said lower inflation was a major reason behind the improvement in households’ outlook.

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"Easing the strain on household budgets was the slowest rise in prices paid for goods and services since the end of 2009, while future inflation expectations similarly weakened," said Markit economist Jack Kennedy.

Households did not report higher earnings, but did describe more workplace activity, which Markit said pointed towards future wage rises.

Official wage growth figures, due for release at the same time as the Markit numbers, are expected to show a 1.8 per cent annual rise in average weekly earnings in the three months to February. This would be the first time wages have outpaced inflation since April 2010.

Reuters