British households are more pessimistic about the economic outlook than at any time since the depths of the recession in 2009, with younger people fearing the effects of a further economic slowdown, a survey reveals today.
The Markit research organisation says that its Household Finance Index (HFI) has dropped to its worst level in two years, with expectations of inflation remaining high. It comes as the Office for National Statistics prepares to release revised figures on economic growth during the last quarter of 2010 later this week, and as the nation's chartered accountants report weak confidence among businesspeople about the immediate future.
The results generally echo recent warnings from the Governor of the Bank of England, Mervyn King, that British households are going through the longest squeeze on their living standard since the 1920s.
Markit's survey suggests that more than a third of the families they asked noticed a worsening in their finances, with just 5 per cent noting an improvement.
With the possibility of higher interest rates, Markit says that mortgage holders are especially downbeat.
The toughest public-spending settlement since the Second World War has also unsettled those who work for local and central government departments an agencies. The continuing sharp increase in youth unemployment, meanwhile, has also badly affected the outlook of the 18- to 24-year-olds surveyed.
Tim Moore, senior economist at Markit, commented: "Heightened pessimism among households threatens to subdue economic activity in early 2011 as rising job insecurity and worries about the financial outlook curtail consumer spending".
The pessimistic view was confirmed in the regular Bloomberg/YouGov Household Economic Activity Tracker, which shows a quarter of Britons feel less secure in their jobs than they did a month ago.
YouGov says that luxuries such as a stop at the coffee shop on the way into work, eating out, trips to the cinema and holidays are "going by the wayside" as the squeeze tightens. There is also evidence of renewed pessimism about house prices, which are extremely exposed to a rise in rates.
Businesses, meanwhile, are reporting what might be described as nervous progress. The latest ICAEW/Grant Thornton UK Business Confidence Monitor shows the economy is indeed slowly recovering, even though business confidence has continued to weaken. Yet financial performance indicators show continuing improvement in line with reports of cash-rich corporates with the funds, if not yet necessarily the inclination, to invest.
Confidence across sectors is varied: in finance, property and business services, confidence will be significantly down next quarter on current trends, while in retail, and in transport and storage, there may be an upswing in future. These trends are overshadowed by data on the construction sector which saw confidence "freefall" at the end of 2010.Reuse content