Household finances continue to worsen in May

35% of households feel their financial situation has worsened in May, according to the latest Household Finance Index (HFI) from Markit - compared with just 7% who reported an improvement.

But the overall outlook for household finances improved, with the index score moving up to 36.0 this month. Basically, households remain pessimistic, but less so than last month.

Tim Moore, senior economist at Markit, said: "May`s survey showed a small but encouraging rebound in households` financial outlook, following a record low during April and declines throughout the first quarter of 2011."

Meanwhile, the `job security index` improved from April`s 26-month low to the highest level since January.

An expert at debt management company Gregory Pennington said: "These findings confirm that things are still getting harder for many people, even if it`s to a lesser degree than in previous months.

"With inflation hitting 4.5% last month, and possibly heading towards 5%, many people are struggling to keep up with their living costs.

"That`s all the more reason for people to take steps to improve their finances. Measures like careful budgeting, putting money into savings and repaying outstanding debts could help to reduce the likelihood of serious financial problems."