Financial Reform

Tag Archives: household budgets

Low Income Families Face Largest Drop in Household Wealth

The Markit Household Financial Index has been released for the month of November. During the past month, the index showed the largest drop in household finances since August.

This study highlights monthly changes in the household finances of families in all income groups. One of the main objectives of the study is to demonstrate disparities in income between different household groups throughout the UK. The results issued this month showed there is a larger gap between the financial positions of the wealthiest and poorest families in the country.

The Markit Household Financial Index uses 50 as a baseline. Anything under 50 indicates the financial position of households is deteriorating. The index for the month of November was 34.6, down from October’s index of 35. The average has been at 37.6 for the year.

The results of the Markit index highlight ongoing fears that the financial stability of households is declining. The results for 2011 have been significantly worse than those of 2009 or 2010. One of the primary factors has been inflation, which has been 5%. Meanwhile, wage growth has been stuck at 2%, significantly lower than the historical average.

Not surprisingly, the survey showed significant concern from respondents. The number of responses that showed a negative outlook on the future of household finances was almost half (48%). That figure was exactly twice that of positive responses (24%).

Investors, politicians and citizens of the UK are deeply concerned about the possibility of a double-dip recession. This new study serves as a reminder that they may have many other things to worry about as well. Although the economy as a whole has experienced a slight recovery, the Markit Household Financial Index shows many poorer UK citizens never felt like things got any better.

As the financial position remains uncertain, citizens have cut back on spending considerably. They do not expect to make larger purchases until the economy begins to show signs of improvement.

Household Budgets Continue to be Stretched

This week’s Inflation data is predicted to reveal that household budgets will continue to be stretched as sustained inflation, muted wages and high unemployment show very little sign of recovery.

Salaries are still expected to lag behind soaring living costs, and the labor market will further decline.

Earlier this month, Sir Mervyn King, the Governor of the Bank of England, had warned of a “long and deep squeeze in real living standards” that will stretch further into 2012.

Wages dropped in 2010 for the first time since the largest budget squeeze in 1982, and is threatening to plunge again this year.

Inflation is overtaking pay rises, while the deteriorating demand for labour is limiting the workforce’s bargaining power.

Professional Auditory Services firm, KMPG, states that Britain’s economy is “getting gloomier,” and that “There was no real reason to think that earnings are going up” because “they are still pretty well stuck.”

Meanwhile, unemployment is rising. The claimant count of jobless people rose by 24,500 to reach 1.52 million, while the broader labor force poll dropped by 26,000 within the months of February, March, April to May.

The figures for the average weekly earnings, also predicted to show gloomy reading, are soon to be released on Wednesday.

Europe’s growth data, is predicted to show an extreme slowdown in the currency.

Analysts predict only a 0.3 percent growth in the embattled eurozone economies for the second quarter. Capital Economics, an Independent consultancy firm, states, “the recovery is faltering.”