UK household finances continue to worsen in September - IHS Markit

According to the report from IHS Markit, at 40.8 in September, unchanged from the previous survey period, the headline seasonally adjusted IHS Markit UK Household Finance Index (HFI) – which measures households’ overall perceptions of financial wellbeing - signalled a further sharp deterioration in the financial situation of UK households, albeit one that was less severe than the falls recorded at the height of the COVID-19 pandemic in April and May. 

Households’ perceptions of their finances in 12 months’ time weakened in September. The respective index was the lowest since May, indicative of a highly pessimistic outlook with regards to household finances over the coming year.

The weaker outlook was driven by a further reduction in the availability of cash and declining savings in September. The respective index for cash availability was the lowest since May, and signalled a marked reduction in the amount of disposable income. As a result, spending declined moderately, although the reduction was the weakest in the current six-month sequence of falls. Amid lower disposable incomes, household savings were again depleted in September. Moreover, the latest fall was the sharpest since December 2013.

Alongside savings, some UK households turned to credit to finance their purchases in September. The survey measure of demand for unsecured credit, such as overdrafts and credit cards, moved further above the 50.0 threshold and was the highest since April.