The monthly Markit household finance index (whose findings are regularly pored over by analysts but is almost unheard of outside the Square Mile) shows that six times as many households (36%) saw their finances deteriorate in June compared to last month, while just 6% recorded an improvement. This meant the index declined to 35.1, the lowest reading for more than two years. And if the survey is correct, we could be on the verge of a double-dip recession - an overwhelming 90% of Britons expect the cost of living to continue rising over the next year.
Tim Moore, senior economist at Markit, said the decline in the index ‘pours cold water on the tentative signs of improvement seen in the last month.’ Last month, a survey by Nationwide suggested that consumer confidence jumped to the highest level this year thanks to a combination of hot weather and the Royal Wedding; while house prices also nudged up.
But although nearly a third of the 1,500 questioned by Markit reported a rise in household spending in June, this came at the expense of savings and higher levels of personal debt. Almost a third of respondents (30%) said their savings had fallen and one in five reported a higher level of household debt. While people using savings to pay for everyday goods is clearly bad news, there is another less gloomy interpretation for falling savings levels at any rate - people are spending their savings while they’re still worth something. After all, money stashed away in the bank isn’t likely to be keeping pace with inflation.
The latest survey from Markit is also unlikely to be a one-off, as it follows a swathe of gloomy data which suggests the downhill trend is being felt across the UK economy. Last week retail figures from the ONS showed that sales fell 1.4% in May. Food inflation also hit a 23-month high last month (jumping to 4.9%) according to data from the British Retail Consortium; while energy suppliers announced they would be hiking up prices for gas and electric too. At the same time, ONS data showed wages grew by a mere 2% in April compared to a year ago.
So although the deepest recession for 70 years may be officially over, the latest Markit data suggests that most Britons have yet to claw their way out of its effect on personal finance. ‘It may be summer time but the living is far from easy,’ Moore says.