UK consumer spend at three-year low

British retail sales growth slowed in August at the fastest pace in more than a year as the squeeze on consumers from rising prices continued.

The Confederation of British Industry’s (CBI) monthly retail sales balance slid to -10 in August from +22 last month, its lowest since July 2016 — just after Britons voted to leave the EU. The reading was far below even the lowest forecast in a Reuters poll of economists, all of whom expected only a modest slowdown in growth.

While retailers expected sales to pick up again next month, they were downbeat about the current business situation. Quarterly figures from the CBI showed retailers reduced staff at the fastest pace since 2009 and they did not expect an improvement soon.

“Despite the warmer weather at the start of the month, retail sales have cooled as higher inflation continues to squeeze consumers’ pockets,” said CBI economist Anna Leach.

Separate data showed British household spending grew at its weakest pace since late 2014 during the second quarter, underlining the strain upon households and retailers.

Year-on-year spending growth dropped to 2% from 2.6%, said the UK’s Office for National Statistics (ONS). Overall growth in UK GDP was unrevised from an earlier estimate at 0.3% on a quarterly basis and 1.7% annually, added the ONS, representing the weakest start to any year since 2012.

The figures also showed that year-on-year business investment growth slowed to zero from 0.7% in the first quarter. Britain’s economy grew 1.8% last year, but that growth relied heavily on robust consumer spending.

The Bank of England said earlier this month that it expected the economy to grow 1.6% percent this year.

Meanwhile, mortgage approvals from British banks hit a five-month high in July but growth in credit card lending slowed a little.

British banks approved 41,587 mortgages for house purchases last month, up from 40,385 in June and 9% higher than in July 2016, the month that followed the Brexit vote. Credit card lending increased by 5.3% year-on-year in July, slowing from 5.5% in June and the weakest increase since March.

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