UK households gloomy about finances as coronavirus crisis hits home
UK households were slightly more positive about their finances in May than in April, but the month still ranked as one of the most pessimistic since 2009.
IHS Markit’s UK household finance index (HFI) – which measures households’ overall perceptions of financial wellbeing – recorded 37.8 in May, up slightly from April’s eight-and-a-half year low of 34.9.
Although the headline number rose, it remained among the worst month recorded since the survey was started in 2009.
There was also a small rise in the future household finance index, although the figure still showed a strong degree of pessimism towards the outlook for financial health.
UK households reported a further severe decline in workplace activity during May.
The rate of decrease was unchanged from April’s survey record, with those employed in media, culture or entertainment sectors signalling the sharpest decline in activity.
The survey showed that Incomes from employment deteriorated at the fastest rate on record in May.
Prior to April, the strongest decline was seen in March 2009, although
the two most recent drops in incomes outpaced this by a wide margin.
Job security perceptions sank into deep pessimistic territory in
April, and latest data revealed that perceptions remained at this
level during May.
The negative job security outlook was broad-based across all industries.
However, there were little signs of stress on household balance sheets despite a further strong deterioration in earnings.
Debt levels held stable once again, while unsecured lending needs rose only slightly.
The avoidance of rising consumer borrowing was largely achieved
through a rapid drop in household spending, with this index
falling to a survey-record low in May.
More than half of all survey respondents (51 per cent) reported a drop in household spending since April, with falling expenditure most widespread in the highest income brackets.
Joe Hayes, economist at IHS Markit, said: “The financial toll of
the coronavirus pandemic and the consequent public health
measures has been heavy, with recent survey data showing
unparalleled declines in workplace activity and incomes from
employment.
“It is also disconcerting to see so many survey respondents
indicating concern towards job security, which could have
a significant impact on consumer spending if the negative
economic impact of the pandemic is protracted.
“Nevertheless, there still appears to be little stress on
household balance sheets, although this partly reflected
a survey-record slump in household spending during May.
“Debt levels were broadly unchanged and unsecured lending
needs such as credit cards barely rose. The concern for the
household sector remains the labour market, which will be
vital in determining the speed at which consumer spending
can return once the economy emerges from the lockdown.”