March 16, 2016 / 9:41 AM / a year ago

Low UK inflation improves households' financial outlook, Markit says

LONDON (Reuters) - Low inflation has improved the financial outlook of British households to its brightest since January 2015, despite a drop in take-home pay, a survey showed on Wednesday.

Markit said its Household Finance Index for March weakened slightly after income from employment fell for the first time since December 2014, but optimism for the year ahead was its strongest since January 2015.

This brighter outlook contrasts with the message finance minister George Osborne is likely to deliver in his annual budget statement later on Wednesday.

He has already warned of a darker economic outlook and said on Sunday that he would have to cut spending by more than planned to reach his goal of a budget surplus by 2020 .

"With fresh public spending cuts expected in today's budget announcement, headwinds to household confidence are likely to persist in coming months," Markit economist Philip Leake said.

Inflation fell to a record low last year and is forecast to rise only slowly. Few households expect the Bank of England to raise interest rates any time soon.

Just 19 percent of households see a rate rise in the next six months, the smallest proportion since August 2013. But 45 percent still expect a move within a year, little changed from the previous month.

Reporting by David Milliken, editing by Larry King

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