LONDON — The Bank of England is making worrying noises about the state of the British consumer as the impact of Brexit filters down to average Brits.
Britain’s central bank released its quarterly “Agents’ summary of business conditions” — a monthly review of what businesses in the UK are up to and their expectations for the future are — on Wednesday, and while its findings broadly showed that the economy is ticking along reasonably well, there were troubling inclusions in the data.
The bank’s agents — who help gauge activity in the UK’s regions — reported an expected slowdown in consumer spending over the next 12 months, as goods get more expensive thanks largely to the impact of sterling’s post-referendum crash.
“Firms had seen strong growth in volumes over the past year, but expected a slowdown in growth in the year ahead. That slowing was entirely accounted for by firms selling consumer goods,” the report says.
“The main factors expected to reduce consumer demand growth were expected changes in consumers’ real disposable incomes and changes in firms’ own pricing — both linked to the impact of the weaker pound,” it continues.
“A fall in consumer confidence was also thought likely to be a drag on growth.”
Here are the BoE’s two key charts:
The bank’s agent’s summary makes it the latest place to warn about the potential for a consumer slowdown in the UK in 2017, and the potential damage it could do to the UK economy. Britain’s consumers have been the biggest driver of the strong GDP growth witnessed over the last handful of years, acting as the great rescuers for the economy.
If consumer spending tails off, so too could overall growth. That is obviously not good.
In February, research house Oxford Economics described the upcoming consumer slowdown as a “troubling omen” stalking Britain, while Pantheon Macroeconomics said that spending tailing off would leave the economy “extremely vulnerable.”
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