Household income fall blamed on inflation and personal debt

Household finances worsened this month, meaning that the spending power of consumers in the UK has taken another knock.

Nearly 40 per cent of households reported that their finances had deteriorated, according to the latest report from Markit, which uses Ipsos Mori data to attempt to predict trends in consumer spending.

Its Household Finance Index is at a two-and-a-half year low. Only 6 per cent of households said that their finances had improved in July. The research group blamed inflation and an increase in personal debt levels for the downcast findings, with the latter rising for the fourth month in a row.

"The mood among British households has been as gloomy as the weather this summer," said Markit's senior economist, Tim Moore. "Higher living costs and stretched disposable incomes continue to weigh heavily on consumer finances."

It was not all bad news, however, with the research showing householders optimistic over what the next 12 months will bring – more so than they have been at any point so far this year.