UK households most pessimistic about financial prospects since 2013
UK households were the most pessimistic about their financial prospects in March since November 2013 as rising inflation began to bite, according to the latest survey from IHS Markit, which found that more than half of respondents expect the Bank of England to hike rates in the next 12 months.
Markit's Household Finance Index printed at 43.2 this month, well below the 50.0 no change reading and marking one of the weakest readings in the last two years.
Meanwhile, the index measuring expectations for finances in 12 months' time slumped to 45.3 from 48.1 in February, with people in the East Midlands the most downbeat about their financial prospects, followed by those in the North East.
Tim Moore, senior economist at IHS Markit, said: "UK households reported greater pressure on their financial wellbeing in March, as rising inflation has started to erode incomes and reduce cash available to spend. On average in the first quarter of 2017 survey respondents have reported the sharpest increase in their everyday living costs for three-and-a-half years.
"A combination of rising inflation and subdued pay trends has forced households to recalibrate their expectations for the year ahead. After holding steady last summer, UK consumers are now more downbeat about their financial outlook than at any time since late-2013."
The survey also found that 58% of UK households expect the Bank of England to raise interest rates in the next 12 months, up just a touch from 56% in February.
Around one-third of survey respondents expect a base rate rise in the next six months.
On Tuesday, figures from the Office for National Statistics showed inflation in February overshot the Bank of England's 2% target for the first time in over three years, increasing the pressure on officials to hike interest rates this year.
The UK consumer price index jumped to 2.3% from 1.8% the month before, which was above the consensus estimate for a rise to 2.1% and the BoE's 2% target.
On a monthly basis, CPI rose 0.7% in February, higher than the forecast rise of 0.5% and following a month-on-month dip in January.
CPIH, a new headline measure of inflation, which includes a measure of owner occupiers’ housing costs and council tax, also rose to 2.3% from 1.9%, beating the forecast for 2.2%.
Even Core UK CPI, which excludes more volatile prices like energy and food, picked up to 2.0% from 1.6% the month before when economists had only expected a 1.8% increase.