Households optimistic - despite lower bank account balances
Published 25 June 2012 by Joel Stanier
Falling wages and difficult economic conditions didn't phase UK households in June, as optimism regarding household finances reached the highest level in two years.
Households are the most optimistic they have been in two years regarding their finances, according to the latest Markit Household Finance Index.
Falling inflation has improved the outlook for most households, even though average wages have seen the sharpest fall in five months. Household spending power continued to fall - with one third of households (33%) reporting a worsening of their finances. Just 6% reported an improvement.
Meanwhile, average debt levels increased for the fifteenth month in a row, and at the sharpest pace since January.
Tim Moore, an economist at Markit, said: "Lower inflation provided some relief to UK household finances in June, ushering in a slower drop in cash availability and the least downbeat assessment of future finances for over two years.
"A worsening global economic backdrop in June, alongside reports of a greater drop in income from employment, continued to keep the pressure on household finances. This in turn resulted in an aversion to major purchases, as well as a further erosion of savings and subdued spending patterns, especially among the lowest income groups."
A spokesperson at thinkbanking commented: "With real incomes falling, it's as important as ever that people take good care of their finances. Looking at the optimistic financial outlook, it appears that many people feel in control of their finances, even though the economy is still struggling.
"Careful budgeting is key. By planning your finances at the start of each month, you could greatly reduce the likelihood of falling behind on anything important."
For people who struggle to manage their finances, the thinkbanking account could help. The account automatically puts money aside for bills and other regular payments to ensure that this money can't be spent elsewhere. You can find out more about the thinkmoney Current Account here.