UK consumer spending seen slowing this year

Slower growth: A pedestrian passes an English Tailoring shop at the Canary Wharf financial, shopping and business district in London. Consumer spending is expected to grow 1.3 this year, slipping further from a six-year low of 1.4 in 2017. — Bloomberg

LONDON: UK households will tighten their belts even more this year as the impact of faster inflation and weak wage growth deepens.

Consumer spending would grow 1.3% this year, slipping further from a six-year low of 1.4% in 2017, EY Item Club said in a report.

While price gains will slow over the next few years, pay increases are also set to remain modest.

The economy is struggling to overcome the effects of the decision to leave the European Union, which triggered currency-driven inflation and created uncertainty that has weighed on investment and wage growth.

Spending growth has dropped from 2.9% in 2016 and the squeeze on consumers is hitting retailers hard, with Toys “R” Us Inc’s UK unit and electronics chain Maplin collapsing into the British equivalent of bankruptcy protection last week.

“While the impact of higher inflation should slowly fade, the UK consumer will be hit by new issues which will impact their spending power,” said Mark Gregory, EY’s chief economist.

“Our prediction of a ‘so-so’ consumer sector over the next few years points to a ‘so-so’ economy, growing at an unspectacular rate compared with past standards.”

EY Item Club expects the Bank of England to increase interest rates twice this year to keep a lid on prices. Higher borrowing costs will further damp household spending, which accounts for about 65% of gross domestic product. — Bloomberg

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Business , uk


Next In Business News

Wall St week ahead: Fed meeting looms for stocks
After the pandemic, a wave of spending by older consumers
Out-of-control shipping costs fire up prices from coffee to toys
G7 leaders commit to raise climate finance contributions
G7 rivals China with grand infrastructure plan
FMM: RM200b stimulus plan needed for SME manufacturers
No trading for KLTM next week
CPO futures likely to experience technical correction next week
Essential economic contributors must be protected
Oil price hits multi-year highs in third weekly gain on demand recovery

Stories You'll Enjoy