British consumers are feeling the strain of rising prices caused by last year’s Brexit vote, suggesting the economy is heading for a slowdown just as London gears up for divorce talks with the EU, surveys and data showed yesterday.
After helping the economy withstand the immediate Brexit shock last year, consumers are reining in spending on non-essentials as prices for day-to-day shopping rise, the British Retail Consortium (BRC) industry group and credit card provider Barclaycard said.
Separate data from market research firm Kantar Worldpanel showed the inflation rate for groceries doubling in the space of a month as prices for food staples including butter, tea, and fish all rose.
Britain’s economy unexpectedly lost no pace last year after the surprise referendum vote in June to leave the EU. However, yesterday’s signals add to evidence that growth is now starting to wilt, just as chancellor Philip Hammond prepares to unveil an annual budget plan later today.
He has signalled he will not spend heavily now but will keep money in reserve in case the economy needs help to get through a slowdown as Britain withdraws from the EU’s single market — an unsettling prospect for many employers and investors.
“We kept the view that it was pain deferred after the Brexit vote, not pain avoided. Now the data is really starting to come through to support that view,” said Oliver Jones, UK economist at Fathom Consultancy.
Sterling fell to a seven-week low against the dollar, hit by the weak data and nervousness among investors ahead of a vote in Britain’s upper house of parliament on whether to give prime minister Theresa May a green light to start formal Brexit talks.
Thirty out of 33 economists in a Reuters poll published yesterday said they were concerned a consumer spending slowdown was under way. The BRC said there was now an “undeniable” trend of cautious spending among consumers on non-essential items.
Over the three months to February, total non-food sales fell by 0.2%, the first fall over a three-month period in more than five years, the BRC said. Barclaycard reported a similar trend as it said discretionary purchases slowed for a fifth month, with Britons having to spend more on food, fuel, and other essentials.
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