Consumer confidence knocked
UK consumers suffered a loss of confidence amid rising inflation and weaker wage growth. It was the lowest reading since the Brexit vote.
A monthly measure of consumer confidence published by market research firm GfK sank to -10, weaker than a median forecast of -7 in a Reuters poll of economists.
Joe Staton, Head of Market Dynamics at GfK, said: “Strong consumer spending has propped up the economy since last June but now the twin pressures of higher prices and sluggish wage growth are squeezing household finances and adding to widespread fears of a Brexit-induced economic slowdown.”
This follows the measure of how willing consumers are to buy expensive items slumping to +1 from +9 in May.
Credit card company Visa has also reported that UK consumer spending fell for the third month in a row in July. Compared with the same month a year ago, spending fell by 0.8%; slightly faster than the 0.2% decline in June.
Britain’s economy initially withstood the impact of the decision to leave EU. But the growing pressure on spending power from a weaker currency that is pushing up inflation caused a sharp slowdown in growth earlier this year.
Inflation is expected to reach 3 percent soon while wage growth has slowed to below 2 percent.
The Bank of England believes that investment by businesses and in exports will pick-up and offset some of lower spending by consumers, potentially paving the way for its first interest rate hike in a decade.