Britons are starting to shrug off the fears that have hampered the country’s economy according to the latest Household Finance Index data compiled by Markit.
The survey producer said that Britons have reported the smallest deterioration to their finances for the first time in 20 months. Fears over spiralling debts and the worry of losing their jobs lessened suggesting that consumers are starting to regain confidence and start on the road to help drag the UK out of recession.
The Index rose to 38.9 in August up from 37.5 in July marking the biggest increase since December 2010. The figure is still well below the 50 mark that would indicate no change from the previous month but the fact that the number has improved shows that the UK is starting to move in the right direction. Optimism is increasing following lat weeks run of good data showing that the jobless rate had fallen, retail sales were up and the appearance that European leaders are finally preparing to tackle the Euro crisis. Fewer consumers were worried about the safety of their jobs, though they were still outnumbered by those that were.
“While the Olympics perhaps helped give a warmer glow to household morale, the breadth of improvement spanning debt trends, inflation expectations, incomes and job security points to a more fundamental easing of the financial downturn,” said Tim Moore, senior economist at Markit.
The index measuring inflation expectations for the year ahead reached the lowest level since February, though the survey was compiled before official data showed an unexpected rise in consumer price inflation in July – to 2.6 percent from 2.4 percent.
Despite the green shoots of recovery being in sight consumers are remaining wary over their finances. The report shows that household spending has risen by its slowest rate for five months whilst both savings and spending money fell. This is most likely due to most people tightening their belts and being hit by high taxes.
The House market remains struggling after Right move Plc. Released its latest house prices report. Uk home sellers cut their asking prices by record levels in August in a bid to sell their properties. The average asking prices in Wales and England fell by 2.4% to £236,260 from July.
“We’ve got weak confidence and the unemployment numbers may get worse before they get any better,” said George Buckley, an economist at Deutsche Bank AG in London. “We’re looking at either a flat or a slight contraction in underlying growth so, however you cut these numbers, and you’re looking at a very weak, poor recovery. You can’t rule out more stimuli from the Bank of England, especially with uncertainty over events in Europe.”
Surely now is the time for the UK government to cut V.A.T and lower other taxes to encourage consumers to spend. After all if you’re confident in your finances then you will be more inclined to spend more and that can only help get the economy back onto its feet.
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