UK households see fastest income growth in at least nine years - IHS Markit

Reuters

Published Jun 18, 2018 18:15

UK households see fastest income growth in at least nine years - IHS Markit

LONDON (Reuters) - British households enjoyed the fastest growth in employment income in at least nine years in June, according to a survey that may give the Bank of England concern that underlying inflation pressures are rising.

The Household Finance Index (HFI) from data company IHS Markit, a survey watched by the central bank, showed household incomes increased this month at the sharpest rate since its survey began in 2009, during the depths of the financial crisis.

A separate survey from payment card company Visa on Monday showed overall inflation-adjusted consumer spending increased 0.9 percent in annual terms during May after a 2.0 percent fall in April -- the first rise in nine months and chiming with strong retail sales data last week.

Despite the upturn, rising living costs prompted a sharper squeeze on household budgets overall this month. IHS Markit said households remained "relatively downbeat" about their financial outlook as a result.

"June data suggests that stubbornly high inflation is set to hold back consumer confidence this summer, with rising fuel costs a prominent reason that increased wages are having a limited impact on spending power," Tim Moore, associate director at IHS Markit, said.

The BoE expects consumers to feel the benefit of a fall in inflation and rising wages after suffering a squeeze on their spending power last year when the impact of the 2016 Brexit vote pushed up prices sharply.

However, it held off from raising rates at its May meeting as it waited to be sure that Britain's economy was recovering from its early 2018 slowdown.

The HFI survey showed weakening expectations that the Bank of England will raise interest rates before the end of this year.

Forty-five percent of respondents expected a rate hike by the end of 2018, down from 55 percent in May.