Written by: Paloma Kubiak
UK households have reported the tightest squeeze on cash available to spend since August 2014.
The Markit Household Finance Index (HFI) measure for April fell to 42.5 from 43.1 in March, driven by strong rises in living costs and subdued pay growth so far this year.
However, despite the sharpest fall in two-and-a-half years, consumer spending remains resilient with households reporting the fastest rise in spending since last June.
The data indicates households are maintaining spending by using savings and noted a greater demand for unsecured credit.
HFI also found that sentiment regarding the financial outlook worsened in April to one of the lowest levels since the summer of 2014, particularly among the oldest age range (55-64). The 1,500 surveyed also reported a decline in job security in April.
Meanwhile, income from employment increased moderately in April and inflation expectations eased back.
Turning to interest rates, the majority of UK households (56%) expect that the Bank of England will raise the base rate during the next 12 months, while three quarters anticipate a rate hike within two years.
Tim Moore, senior economist at IHS Markit, said: “There was little sign that UK households have begun to rein in day-to-day spending. Instead, survey respondents reported the largest drop in savings for just under three years, while demand for unsecured credit continued to increase during April.
“Evidence that consumers are opting to maintain spending rather than belt-tighten provides a positive signal for UK economic growth in the short-term. The latest survey also highlighted a robust increase in workplace activity in April, which was broadly spread among private sector employees. This is an early signal that the wider UK economy has carried through a healthy degree of growth momentum into the second quarter of 2017.”