LONDON (Reuters) – British households grew extra optimistic about their funds this month as they confronted much less of a squeeze from inflation and benefited from larger pay – although most will probably be in for a shock if the Bank of England raises rates of interest subsequent month.
FILE PHOTO: People’s shadows are seen as consumers are silhouetted within the vivid sunshine on the Westfield purchasing centre, Stratford, London January, 28, 2017. REUTERS/Russell Boyce
Financial information company IHS Markit mentioned its month-to-month Household Finance Index rose in July to its second-highest stage since December 2016 at 44.6, up one level since June and above its long-run common.
“July data indicated light at the end of the tunnel for UK household budgets,” mentioned Sam Teague, an economist at IHS Markit.
Britain’s economic system has picked up since a weak begin to the yr, when development was hit by dangerous climate in addition to excessive inflation sparked by 2016’s Brexit vote. But final week the International Monetary Fund forecast that full-year development would nonetheless be the bottom since 2012.
Nonetheless, most economists polled by Reuters assume the Bank of England will increase rates of interest subsequent month for less than the second time for the reason that monetary disaster, because it judges even modest development dangers pushing up home inflation pressures.
Just eight p.c of households surveyed by IHS Markit count on a charge rise subsequent month, although 51 p.c assume one will come over the subsequent six months, up from 45 p.c in June.
Households additionally judged inflation pressures to be at a 13-month low in July. Official information final week confirmed client worth inflation unexpectedly held at its lowest in over a yr.
Separately, the EEF producers’ affiliation mentioned its members had loved “very strong” development over the previous yr however that concern over Britain’s departure from the European Union in lower than a yr was holding again funding.
“This domestic uncertainty is now being exacerbated by global trade tensions which could add up to potentially different dynamics over the next year,” EEF chief economist Lee Hopley mentioned.
Reporting by David Milliken, enhancing by Andy Bruce