UK spend falls further as house-price growth slows
The broad-based weakness is being blamed on a squeeze on pockets as inflation outpaces wage growth as well as concerns about the health of the economy. The latest figures leave both household expenditure and the property market at their weakest in more than four years.
A report from IHS Markit and Visa showed consumer spending dropped 0.8% year-on-year, with clothing, household goods, food, and transport among the worst hit. Home-price increases weakened to an annual 2.1% in the past three months, its slowest since April 2013.
The two downbeat reports come days after the Bank of England downgraded its economic outlook and governor Mark Carney warned that Brexit uncertainty is weighing on business and households. BoE deputy governor Ben Broadbent said on Friday that the “maximum rate of pain” for consumers will soon pass, though any improvement could be modest. The central bank also cut its forecast for wage growth last week.
In addition to the income squeeze, consumer expenditure has been hit by concerns among shoppers about the broader outlook after the economy slowed dramatically in the first half of the year. “Alongside the renewed squeeze on household budgets, uncertainties linger over the direction of the economy. This makes it seem unlikely that consumer spending will recover in the current challenging conditions,” IHS Markit economist Annabel Fiddes said.
The July consumer figures showed a 6% rise in spending at hotels, restaurants, and bars. Markit said this may be partly related to an increase in “staycations,” with the weaker pound making foreign holidays more expensive. Sterling has fallen 13% since the Brexit vote in June 2016.
According to the Halifax report, house prices slipped 0.2% in the three months through July against the previous quarter. That’s a fourth consecutive decline, the first time that has happened since 2012.
