Household finances are taking a huge turn for the worse, the worst in Britain since the height of the recession in 2009. Amidst fresh evidence that many consumers are struggling to try and cope with curbs on wages and rising fuel prices.
All this is fueling fears that a double dip recession is a possibility as the monthly Markit index showed gloomy public spending what little savings and increasing debt just trying to make ends meets.
The survey suggested there was a boost in spending in May that was caused by the royal wedding and hot weather but was proved to be short lived with 36% of households saying their financial situation worsened in the month with only 6% saying theirs improved.
Retails official figures in May that were published last week show a 1.5% drop in volume of activity on high street and the Markit report will also show fresh evidence to the City that the economy remains sluggish after the deepest and longest recession since the early 1930s.
Since last autumn output has flatlined with a snow affected decline in GDP in the final quarter of 2010 match by a small growth in the first quarter of 2011 with no movement either way since. The City is also lowering their estimates of growth for the second quarter because of the figures showing very weak consumption and almost a complete slow down in output at factories.
Markit the financial information company said data collected for its monthly index indicated that half of all households plan on their finances deteriorating over the next year with just 19% seeing an improvement. They also showed how household spending had increased in June in all but the poorest of households and said that higher spending, in part, reflected higher prices and lover savings reduced income from work.
Thirty percent more households mentioned a drop in savings over the month. Twenty percent of those that responded reported increases in debt compared to 15% that report less debt. The Office for National Statistics last week reported that the average pay was rising at a rate of just 1.8% annually and failing to maintain the inflation rate as measured with the consumer price index that was at 4.5%.