UK households’ attitude towards their finances is the least pessimistic since the spring of 2010, according to the latest Markit household finance index (HFI).
The latest survey put the index at 38.4 in September, still some way below the figure of 50.0 that separates improving and deteriorating finances, but a big increase from the depths of the survey 18 months ago, in early 2011 and only beaten in the last two years by August’s figure of 38.9.
The survey shows that around 40 per cent of households still expect their financial situation to get worse over the next 12 months, compared to 29 per cent who expect to see an improvement, the least pessimistic outlook since March 2010.
Tim Moore, senior economist at Markit, said: "September's survey suggests that the gradual easing of pressure on real incomes so far in 2012 continues to support household finances.
“The headline HFI reading compares favourably with the trend seen over the past two years and, perhaps most encouragingly, the squeeze on savings was the least marked over this period."
The survey showed that employees working in IT and Telecoms were the least pessimistic. Perhaps unsurprisingly, employees predominantly working in the public sector were the most pessimistic as they anticipate further government cuts in the second part of the government’s parliamentary term.
This is borne out by the figures that show the trend between workers seen since the government came to power in May 2010 is continuing. Workers in the private sector were less downbeat than workers in the public sector by a margin of 47.1 to 39.7 for state employees.
London was the least pessimistic region, while Wales was the least optimistic region in the UK.
The figures reveal that the decline in savings has slowed and the public is experiencing the least severe squeeze on disposable cash since December 2010.
Household income continued to decline but at a slower rate. 12 per cent of respondents noted a decline in incomes against eight per cent who registered an increase.
The index measuring job security fell slightly in September, from 44.9 to 43.9 but this was still higher than any month in 2011.
Mr Moore said: “The recent stabilisation in overall job insecurity also contributed to a less downbeat assessment, with households now the least pessimistic about their future finances since early 2010.”
However, the survey outlined one area of concern; perceptions over the future direction of inflation. The inflation index rose from 83.3 to 85.8, its highest level since May and the largest monthly rise since January 2011.
75 per cent of respondents believe the cost of living has increased in the last month. The month-on-month rise in year ahead inflation expectations was the fastest since November 2010.
Mr Moore said: "Around three quarters of households noted an increase in their living costs during September, and the monthly jump in inflation perceptions was the largest since the January 2011 VAT rise."