In ‘full-scale reverse’ as household finances tumble

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Household finances worsened at their fastest rate in four months in May as some mortgage holders grappled with higher repayments, while worries about jobs and rising living costs also increased, a survey showed.

Markit’s headline household finance index fell to 36.6 in May from 37.0 in April, well below the 50 level which would mark no change in finances, showing the sharpest deterioration in household finances since January.

“May’s survey shows another intensification of the household finance downturn, with the trend moving into full-scale reverse after some encouraging signs earlier in the year,” said Tim Moore, a senior economist at survey compiler Markit.

Public sector workers’ finances deteriorated more in May than at any other time so far this year.

By contrast, the financial situation of those employees working in the private sector worsened at its slowest rate in around 18 months.

The decline in the index comes after the Bank of England kept alive the prospect of more monetary stimulus for the economy, which it said was growing more slowly than expected.

The economy fell into its second recession since the financial crisis after a shock contraction in the first quarter of 2012, data showed in late April.

“The latest survey also gives an early indication that the UK economy continues to stutter through the second quarter, with respondents signalling an overall stagnation of their workplace activity,” Mr Moore said.

The survey of 1,500 people was conducted from May 9 to May 14.