UK household finances remain squeezed by inflation

Household finances in the UK remain under the greatest pressure since mid-2014 amid rising inflation, according to a survey released on Wednesday.

IHS Markit's Household Finance Index nudged down to 42.4 in May from 42.5 the month before, remaining well below the post-crisis peak of January 2015, as households reported one of the fastest rises in living costs since early 2014. This meant cash available to spend fell to its lowest level in two-and-half years in May.

In addition, survey respondents indicated that their need for extra unsecured borrowing continued to rebound from the lows seen last year.

The survey also found that UK households remain downbeat about their financial prospects, with the seasonally-adjusted index measuring expectations for finances in 12 months' time down to 47.3 in May from 47.8. The index has been below the neutral 50.0 mark since April last year.

Senior economist Tim Moore said: "UK households experienced sharply rising living costs against a backdrop of subdued pay growth in May, which contributed to a sustained squeeze on financial wellbeing.

"Recent pressures on UK consumer finances have been the sharpest for almost three years. There are also signs that some households have responded to stretched budgets by taking on extra borrowing."