The Markit Household Finance Index (HFI), measuring overall perceptions of financial wellbeing, rose to 42.1 in February, its highest reading since the survey began in February 2009.
Markit said the rise signals that pressures on household finances have now eased in each of the past three months and are the lowest for just over five years.
Reported by Talking Retail, a reduced squeeze on household finances reflected slower inflationary pressures in February, alongside a slight rise in income from employment and a stabilisation of household debt levels, according to the latest survey data.
Meanwhile, household spending dipped in February, suggesting that unusually bad weather conditions may have weighed on spending. Although only slight, the rate of decline in household expenditure was the most marked since January 2012.
Tim Moore, senior economist at Markit, said:
“The tide has started to turn for UK household finances, as falling inflation and improvements in labour market conditions helped reduce the squeeze on budgets to the lowest for at least five years in February.
“Adding to hopes that household finances are on the cusp of a rebound, the latest data finally pointed to positive expectations for financial wellbeing over the year ahead and households noted the most subdued outlook for living costs since early 2010.
“However, there were early signs that the recent storms and unusually wet weather have caused a temporary setback for retail sales and business activity across some parts of the UK. In particular, people living in the South West reported a marked dip in their workplace activity during February, while the trend in overall UK household spending was the weakest recorded for just over two years.”
Source: Markit & Talking Retail