Householders gloom deepens over price fears

Confidence among households over the state of their personal finances has slumped as families brace themselves for soaring gas and electricity bills this winter, experts warned today.

Despite inflation dropping to its lowest level for nearly three years in September – 2.2 per cent – households' optimism over their finances during the next year slumped in October, according to the financial information firm Markit.

With four of the main six energy firms raising prices by up to 9 per cent, Markit reported an "abrupt end" to the improving outlook this month. Its household finance index, where a score below 50 represents declining sentiment, sank from 44.3 to 37.4, while more than twice as many households expect their finances to deteriorate as those who think they will improve over the next year.

Food prices are also likely to add pressure to household budgets over the next 18 months.

Tim Moore, Markit's senior economist, said: "Households indicated sharp downward revisions to their financial outlook in October, bringing a rather abrupt end to the improvements seen throughout the summer. While pressures on current finances were reported to have moderated again, helped by stabilising incomes and lower debt, the steep reversal in future sentiment is a clear signal that households are likely to keep a tight rein on spending in the months ahead."