U.K. household finances deteriorate further in October

U.K. household finances have deteriorated further at the beginning of the fourth quarter, according to the latest survey data. The headline seasonally adjusted IHS Markit Household Finance Index dropped to 45.1 in October from September’s 45.7. Even if this hinted at a more solid degree of pessimism by U.K. households towards their current financial situation, it was a comparatively low level of negativity compared with the average since 2009.

The more negative skewedness since September was partially due to softer employment income growth and the resulting squeeze cash availability. Nevertheless, households stimulated spending in October, with the survey data implying that unsecured credit and savings both were used to facilitate higher expenditure. Survey respondents were less worried regarding job security than in September, while living costs are likely to rise at the softest pace in two years.

Meanwhile, the index gauging year-ahead expectations towards finances dropped from 49.2 to 48.5 in October. This indicates towards a more soft judgement for future financial wellbeing. Regional data showed that the overall decline was driven by those living in the South of England.

Increased levels of workplace activity was hinted by U.K. households in October. People employed in the retail sector were the least positive, while the strongest confidence was seen at those working at energy, transport or utilities companies. In the meantime, even if perceptions about job security remained negative, U.K. households gave the second-least downbeat assessment since the survey’s inception in February 2009. The seasonally adjusted index rose to 49.7 in October.

Households in the U.K. recorded a further steep rise in living expenses in October, but cost pressures eased since September and were the softest in nearly two years. Inflation expectations over a 12-month horizon eased for the second straight month and was the lowest since October 2016.

Latest expectations about the interest-rate setting behaviour of the Bank of England were little changed since the September survey. Half of the surveyed U.K. household expect the interest rate to be hiked in the next six months, and nearly three-quarters expect the hike to be made in the next year.

At 16:00 GMT the FxWirePro's Hourly Strength Index of British Pound was bearish at -94.07, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 115.398. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex