The continuing deterioration in household finances in the U.K. shows that consumer spending is set to remain under pressure for some time to come, IHS Global Insight chief European and UK economist Howard Archer said Monday.
A further fall in the household finance index in May, reversing the improving trend seen in the early months of the year, mainly reflects increased pressure on public sector workers whose finances deteriorated to the lowest level so far this year, higher mortgage repayments and heightened inflation expectations, the economist said.
Also, news that the UK is back in recession, combined with heightened worries over the situation in Greece and how this could hit the UK economy, added to the weakness in the already-low consumer confidence.
Data compiled by Markit Economics today showed that British households' financial situation deteriorated for the third month in a row, with the relevant index falling to a four-month low of 36.6 in May from 37 in April. An increase in inflation expectations which rose to an 8-month high and a further fall in income from employment contributed to the deterioration of the index.
However, UK households were less pessimistic about their future finances, with the corresponding indicator climbing to 40.1 in May from April's four-month low of 39.2, data showed.
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