UK household sentiment falls to 11-month low on slowing economy and Brexit fears

UK household sentiment has hit an 11-month low as job fears grow on mounting Brexit uncertainty.

IHS Markit’s household finance index (HFI) – based on consumer’s financial wellbeing – has dropped to its lowest level since March 2018.

Read more: Bank of England slashes UK growth forecast

The survey also revealed that job security perceptions deteriorated for a fourth consecutive month despite unemployment at 40-year lows.

Year-ahead financial health expectations were more downbeat than in January.

It comes after the UK’s annual GDP growth slowed to 1.4 per cent last year, the weakest expansion since 2012, and the Brexit impasse continues with less than six week until Britain’s scheduled departure from the EU.

IHS Markit economist Joe Hayes said: “The impact on confidence caused by Brexit uncertainty continues to pose a notable risk to the domestic economy, also highlighted by job security perceptions becoming increasingly negative in February.”

UK households reported higher living costs, despite strong wage growth and softer inflation recently, and a slowdown in both workplace activity and income.

“The survey also signals that the improvement in real earnings growth, which has been driven by higher nominal pay and softer inflation, may not necessarily translate into boosted spending by UK consumers,” Hayes added.

The Bank of England has maintained that interest rates could move in either direction post-Brexit, and the response would not be automatic.

Read more: Brexit uncertainty costs UK £800m a week

Rate-setter Gertjan Vlieghe said last week a no-deal Brexit would most likely lead to an easing of monetary policy, while even in the case of a deal a slower pace of hikes would be required.

The HFI survey showed that the share of households expecting the Bank’s next move to be a cut grew to 13 per cent, its highest since December 2016.