More than a quarter of households say their finances declined in October, as consumers increasingly worry about the future, according to a new study released today. Some 27% of survey of 1,500 people said that finances had declined in the past month – in comparison with 7% that reported an increase. As a result, the Markit Household Finance Index dropped slightly from 40.2 in September to 40. October data pointed to a sharp decline in expectations for household finances in the year ahead. More than twice as many respondents (45%) expect their financial situation to worsen as those that forecast an improvement (20%). Because of this Markit said its diffusion index, measuring future finances, dropped to 37.7, from 40.7 in September, its lowest level for three months. It said the fall in the index was mainly driven by a survey record decline in sentiment among people in the youngest age category (18-24 years) – possibly in response to concerns about changes to student loans and higher education funding. Job security remained a prominent worry among households in October, in part due to the announcement of government spending cuts. Around 24% of households reported lower job security compared with September, while just 6% felt safer in their jobs. Tim Moore, cconomist at Markit said: “The October HFI data show that households grew increasingly worried about their future finances in the lead up to the comprehensive spending review. “Their finances, both current and future, were seen to have deteriorated on average, as did job security in both the public and private sectors. Lower incomes resulted in cuts to household spending and appear to have been behind the first increase in debt for nine months. “Low levels of household confidence are clearly a concern for short-term economic growth prospects, and the forthcoming 20-30% reductions in some government department budgets will have added to many households’ worries about their job security. With people adjusting their own spending in response to anxiety about future finances, the wider economy may be set for an extended soft patch before we see the long-term gains from the deficit reduction and benefits to the private sector of a leaner government.” He added: “The fact that the government has not watered down the spending cuts has certainly given reassurance to the financial markets, but we need to wait and see if the arrival of the spending review will at least remove the uncertainty lingering over households’ future finances and therefore help pave the way towards a firmer, more sustainable, growth footing.”

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