Britain's mood sours as costs rise

Inflation expectations have climbed to a new survey high as food increases in price. Photo / Thinkstock

British households are growing increasingly pessimistic about the state of their finances, with higher food and fuel costs - coupled with a sluggish job market - depressing sentiment and driving inflation expectations to new highs, according to a survey published yesterday.

The Markit Household Finance Index shows a sharp rise in the number of households expecting their finances to worsen in the coming year, with more than a third - 34 per cent - of those quizzed reporting a deterioration in their finances this month.

Only 6 per cent saw improvement, paring the overall index to 36.1, down from 39.9 last month.

Inflation expectations climbed to a new survey high as around 89 per cent of households said they expected average prices for goods and services to rise over the year.

The figures come less than a week after official data showed that the annual rate of price increases, measured by the consumer price index, had climbed to 3.7 per cent last month. Rising expectations will add pressure on the Bank of England to raise interest rates.

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