The monthly Markit Household Finance Index shows that families’ budgets became even more strained in April for the first time this year. Four times as many households (32%) said that their finances had worsened last month than reported an improvement (8%). The reading for the overall index came in at 37.7, down from 39.3 in March (readings above 50 indicate a stable income, and anything below this point shows conditions are deteriorating).
Workers earning below £23,000 a year and those living in rented local authority or housing association accommodation were hit particularly hard. Almost half of council tenants reported a deterioration in their household budgets, compared with only 2% who said their financial situation had improved.
However, people from all income groups suffered. Of the 1,500 people surveyed, 42% expect their household finances to worsen again in the next year, compared with 27% who believe things will get better, financial information firm Markit said.
The pressure on consumers’ wallets is bad news for the British economy at a time when consumer confidence is already low. Retail sales in March were 0.7% lower than the month before, and confidence among UK businesses hit its lowest level in at least 21 years in February.
Later this week the government will give its latest GDP reading, which will show whether Britain has slipped into a triple dip recession. The last update from the Office for National Statistics showed a 0.3% fall in GDP in the final quarter of 2012.
Analysts expect Britain to narrowly avoid a triple-dip recession this time round. But even so, Markit says the news will provide little relief for cash-strapped consumers.
‘Triple-dip or no triple-dip, there has been little alleviation of the strain on households’ financial wellbeing so far this year,’ Markit’s senior economist Tim Moore said. ‘Moreover, with incomes failing to keep pace with living costs, household finance constraints are likely to act as a further drag on consumer spending over the months ahead.’