Household finances remain under severe pressure this month
The IHS Markit UK Household Finance Index (HFI) – which measures households’ overall perceptions of financial wellbeing – recorded 37.8 in May, up only slightly from April’s eight-and-a-half year low of 34.9.
While the headline number rose slightly, it remained among the worst seen since the survey began in 2009.
There was also a small rise in the Future Household Finance Index, although the figure showed a strong degree of pessimism towards the outlook for financial health.
UK households also reported a further severe decline in workplace activity during May.
The rate of decrease was unchanged from April’s record, with those employed in media, culture or entertainment sectors signalling the sharpest decline in activity.
Income from employment fell at the fastest rate on record in May.
Meanwhile, job security perceptions remained in deep pessimistic territory, with people in all industries negative about the outlook for job security.
On a positive note, there were little signs of stress on household balance sheets despite a further strong deterioration in earnings.
Debt levels held stable – as they did in April – while unsecured lending needs rose only slightly.
The avoidance of rising consumer borrowing was largely down to a rapid drop in household spending.
More than half of all respondents (51%) reported a drop in household spending since April.
Joe Hayes, economist at IHS Markit, said: “It is unsurprising to see further woe for UK households in May, with our UK Household Finance Index revealing that finances remained under severe pressure. The financial toll of the coronavirus pandemic and the consequent public health measures has been heavy, with recent survey data showing unparalleled declines in workplace activity and incomes from employment.
“It is also disconcerting to see so many survey respondents indicating concern towards job security, which could have a significant impact on consumer spending if the negative economic impact of the pandemic is protracted.
“Nevertheless, there still appears to be little stress on household balance sheets, although this partly reflected a survey-record slump in household spending during May.
“Debt levels were broadly unchanged and unsecured lending needs such as credit cards barely rose. The concern for the household sector remains the labour market, which will be vital in determining the speed at which consumer spending can return once the economy emerges from the lockdown.”