Strain on household finances eases but sentiment remains weak - survey
By Abigail Townsend
Date: Monday 22 Jun 2020
(Sharecast News) - The pressure on household finances caused by the Covid-19 pandemic eased slightly in June, a survey showed on Monday, although the ongoing crisis continued to weigh on sentiment.
IHS Markit's Household Finance Index for June, which measures households' overall perceptions of financial wellbeing, printed at 40.7. That marked an improvement on May's reading of 37.8 and a further improvement on April's historic low.
However, the reading remained "consistent with a strongly pessimistic attitude" among UK households, the survey compiler said. It was also still below the pre-Covid-19 average of around 45.
The outlook for finances over the next 12 months showed that UK households were the least negative about the prospects for their financial health since March.
Workplace activity fell sharply in June, but the rate of contraction slowed on the previous month.
Joe Hayes, economist at IHS Markit, said: "It is reassuring to see the UK Household Finance Index rebounding in June, as it suggest that the financial hardship enduring during the height of the lockdown is easing.
"However, it appears that households are still faced with a number of difficulties which will hold back a broad-based economic recovery.
"Job security perceptions are still at extreme levels of pessimism, and the data here suggest there has been little pickup. This isn't surprising given that large parts of the UK economy remain shuttered, but such negatively towards employment status is likely to generate risk aversion in consumption habits.
"If households are fearful for their job security and their incomes are falling, the UK's path of recovery could be a slow one."
The survey also asked respondents for their views on the cost of borrowing. Around half expect the Bank of England to increase interest rates within the next year, up from 44% in May.
IHS Markit surveyed 1,500 adults between 11 and 15 June.
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