Record low inflation is a boost to household finances

Posted by Amy Flower in Personal Finance on 23 April 2015 - Amy is a Senior Credit Analyst at checkmyfile

In April this year, the people of the UK have for the first time in 6 years felt less pressure on their finances and more money in their bank. The low inflation and positive employment has allowed the economy to grow and the UK households now begin to breathe a sigh of relief.

A survey on 2,000 household conducted by Markits on household finances has shown that families are having the greatest rise in their incomes since the recession. Many of them are not able to save or spend the money and are repaying debts faster than they have been in previous years. The results are positive and enabling the economy to see the fruits of their labour and being in a position where they can afford to repay their debts or up the payments they already make in order to be clear sooner.

The analysis of the results found by Markits survey were made by EY ITEM Club, an independent company free of any political, economic and business bias. The Club predicted the results would be at this stage in development from the low inflation recorded historically and more recently in February and March this year.

Markits also conducted another survey on what people in employment predicted their pay rise to be this year. The results of this indicated that those taking part in the survey believed they would not be receiving a good pay rise this year but the majority do not expect to see more than a 1% rise.

The sustainability of the economic upturn is in danger if the lowest paid workers do not foresee an increase in their pay for 2015 and the highest earners (within the study) are not expecting more the 1.5%. With many companies adjusting their pay reviews within April the next couple of months will be crucial in determining if the upturn will be maintained and grow further.

With the election looming, employers, businesses and corporate companies will all be on tenterhooks waiting to see what impact the next government will do and if they will also be a positive or negative influence on sustaining the positive steps for our economy.

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