Household finances still feeling the squeeze, figures show
The squeeze on household finances intensified at the start of 2017 as perceptions about price pressures hit a three-year high, according to an index.
Inflation was perceived by households to be at its highest in three years, with a further acceleration also predicted over the coming 12 months, according to the Markit Household Finance Index.
The overall reading for the index fell from 45.2 in December to 43.9 in January. Readings above 50 indicate households' financial situations are improving, and ones below this level suggest they are getting worse.
The index asks 1,500 people aged 18 to 64 years old across Britain about their financial situation. The latest research took place between January 11-15.
The survey found that with price pressures playing a "key role" in depressing financial perceptions, people's appetite for making major purchases was close to its lowest since the start of 2015.
On Tuesday, figures from the Office for National Statistics (ONS) showed the Consumer Price Index (CPI) measure of inflation hit 1.6% in December - the highest level in two and-a-half years.
Economists have suggested inflation could move higher in the coming months, as rising wholesale costs for goods like food and fuel are passed on to consumers.
Bank of England figures have also recently shown strong annual increases in non-mortgage borrowing, prompting charities to warn that some people who are currently managing their debts could be tipped over the edge by tougher economic conditions for households.
Markit's index found that households' perceptions for their finances in 12 months' time were also downbeat, with a reading of 48.2.
Despite workplace activity growing for the last six months, households reported greater worries about job insecurity in January than in November and December. Income from employment also fell slightly in January, following three months of broadly stagnant pay.
More households are also expecting a rise in the Bank of England base rate on the horizon, and fewer expect the rate, which currently stands at 0.25%, to be cut.
Philip Leake, an economist at IHS Markit, said the research suggests "mounting price pressures pose a threat to UK households' financial wellbeing."
He said: "Price pressures were accompanied by slightly lower pay rates in January, meaning that households' financial outlook remained downbeat.
"With regard to monetary policy, the consensus among households appears to be that tightening to curb inflation is more likely than loosening to stimulate growth. Around 62% foresee a rise in the Bank of England base rate this year, the highest proportion since January 2016."