Households' financial expectations remain stable amid rising workplace activity and low inflation

According to latest figures from Markit, the Household Finance Index (HFI) posted 44.8 in September, down from 44.9 in August.

Markit said that while the figure signalled an ongoing financial strain, household perceptions remained far less downbeat than the post-crisis trend (40.1).

Philip Leake, economist at IHS Markit, said: "Barring a minor dip in July, UK households’ financial expectations have appeared largely unmoved by June’s surprise Brexit vote.

"September data signalled a broadly stable financial outlook for the second month running. Similarly, the current strain on finances remained subdued relative to post-recession trends.

"A swift monetary policy response and a more settled political picture have likely helped to allay fears of a severe downturn. Moreover, the latest survey highlighted muted inflation perceptions, as well as sustained growth of workplace activity."

Growth in workplace activity was sustained in September, marking two months in a row of expansion, the report said. The sharpest increase was in the manufacturing sector, while retail was the only sector to see a fall in activity. Income from employment increased for the sixth month in a row.

Current and future inflation perceptions eased in September. Households suggested current price pressures were the weakest in six months. Expectations for living costs in 12 months' time fell to their lowest levels since January.

One in four (25 per cent) people surveyed expect the Bank of England's next move on interest rates to be a cut, compared with 39 per cent who said this in August.

Meanwhile, the Federation of Small Businesses (FSB) has found that UK small business confidence has continued to fall, dipping into negative territory for the first time since 2012. Business owners feeling confident are outnumbered by those that feel the opposite.

However, FSB found many immediate economic conditions improving, with small firms reporting greater access to finance, a rise in new employment and reduced spare capacity in their businesses.

In the first data gathered since the UK’s decision to leave the EU, the FSB Q3 Small Business Index (SBI) found business confidence in negative territory (-2.9). This is the second largest year-on-year fall in confidence in the Index’s history, with the largest drop occurring in the previous quarter of 2016 (Q2). Confidence has now fallen for the last three quarters in a row.

Despite this, FSB found many positive signs of small businesses proving resilient and getting on with the job in hand, in spite of a fragile economic outlook in the longer term, spurred by political uncertainty caused by the outcome of the EU referendum. Many firms may have ‘priced-in’ the impact of the EU referendum result in advance of the vote, with others now looking for immediate growth opportunities in the wake of the result.

Recently issued HM Revenue and Customs overseas trade statistics show in July 2016 the value of exports (EU and Non-EU) decreased to £23.9 billion, and imports (EU and Non-EU) decreased to £39.7 billion, compared with the last month. Consequently the UK is a net importer in the month, with imports exceeding exports by £15.9 billion.

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