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UK Business Optimism Lowest Since 2009; Household Finance Outlook At 5-Month Low

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Confidence among British businesses sunk to its lowest level in nine years during the third quarter and households' assessment of their financial conditions dropped to a five-month low, amid the lingering political uncertainty over Brexit, survey data from IHS Markit showed on Monday.

The net balance of firms anticipating a rise in business activity in the coming 12 months was +32, down from +39 in June, the October IHS Markit Business Outlook survey showed. Optimism peaked at +66 in February 2014.

The latest reading indicates that the degree of confidence is the lowest since composite data were first compiled nine years ago, exceeding the previous survey-record low of +33 seen during October 2011 +33, IHS Markit said.

Separately, the IHS Markit Household Finance Index, which measures households' overall perceptions of financial wellbeing, fell to 44.5 in November from 45.0 in October, to signal the greatest degree of pessimism since June.

However, UK households were optimistic towards their financial health prospects over the coming year for the first time since July and the outcome was the strongest since the start of 2015.

Both manufacturers and service sector firms were less confident in October mainly due to the Brexit-related concerns and worries about a 'no deal' outcome for EU negotiations.

While manufacturers were also concerned about global trade frictions and softer automotive sector demand holding back growth in the next 12 months, service sector firms were worried about staff shortages and higher operating expenses.

Staff hiring intentions were the most subdued since February 2013, and capex plans hit a seven-year low, being the least upbeat of all nations monitored by IHS Markit's global outlook survey.

Meanwhile, the household finance survey showed that living costs rose at the slowest rate in just over two years, but spending growth eased to a 15-month low. Job security perceptions remained negative for a fourth successive month in November.

Households' inflation expectations edged up in November and close to three quarters of households see interest rates rising again within the coming year. However, the share of surveyed households expecting a rate hike in the next six months fell to 48 percent from 50 percent.

"With official data showing that UK wage growth is close to a decade-high, and if positive trends in the HFI data for incomes and inflation can be sustained, sentiment towards current finances should lift as we enter 2019," Joe Hayes, an economist at IHS Markit, said.

Earlier on Monday, figures from the property market data website Rightmove showed that UK house prices declined sharply in November at the fastest monthly pace in seven years.

Average asking prices dropped GBP 5,222 or 1.7 percent month-on-month to GBP 302,023 in November. That was biggest November drop since 2012, Rightmove said.

Compared to the same month a year ago, house prices were 0.2 percent or GBP 607 lower in November, marking the first year-on-year fall in asking prices since November 2011.

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