August household finances 'worse than in recession'

The latest Markit Household Finance Index - an early indicator of 'actual changes in household finances each month' - indicates household finances are worse now than at the height of the recession in 2009, as reported by The Independent.

The latest figures represent the fastest drop in household savings and disposable income since the Index began in early 2009. August figures are as low as 33.2 - where results below 50 means finances are getting worse.

That means the amount of money people have available to spend is falling at the fastest rate since the research began. The Index also suggests that debt rose the most we've seen in nine months - and total debt increased for the fifth month in a row.

There are a number of factors that are having an effect on family finances. Take-home pay is not matching the rise in inflation - the consumer price index (a measure of inflation) is expected to reach 5% by the end of the year (it was 4.4% in July).

High unemployment and rising levels of debt are also having an impact on family budgets.

The knock-on effect of this is that people have less money available for savings and spending, which could affect the economic recovery in the UK.

Tim Moore, a senior economist at Markit warned: "Consumer spending (accounts) for around two thirds of UK gross domestic product… this does not bode well for the economy in the second half of the year."