THE proportion of households expecting their finances to deteriorate over the next 12 months has for the first time in three years exceeded that forecasting an improvement, amid the Brexit vote’s impact, a Bank of England survey shows.
Publishing the survey, by NMG Consulting, the Bank cited the negative impact of sterling’s drop on real-terms pay as one explanation for households having become more pessimistic about the outlook for their finances.
The Bank said: “For the first time in the past three years, the net balance of households expecting an improvement in their financial position turned negative. This has moved broadly in line with households’ assessment of their personal financial situation over the past 12 months, which suggests recent experiences have helped shape future expectations.”
It added: “One explanation for the deterioration in these backward and forward-looking indicators is the sharp slowing in real income growth, following the fall in sterling.”
Annual UK consumer prices index inflation has leapt from 0.3 per cent in May 2016, just ahead of the Brexit vote, to an above-target 3.1 per cent. This surge, fuelled by sterling’s post-Brexit vote weakness, has led to a renewed fall in average pay in real terms.
The Bank said: “The decision...to leave the European Union is still influencing households’ outlook - views on...the general economy and their own finances have become slightly more pessimistic over the past year.”
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