LONDON — Since Britain voted to leave the European Union last June, the economy has confounded the forecasts of almost every major economist and economic organisation, remaining resilient in the face of worries about future trade relationships around the world.
But in recent months, the first signs that British consumers — who have fuelled the UK economy’s strength in the past handful of years — are starting to moderate their habits. If consumer spending is starting to tail off, that’s a big problem.
The logic is simple — when people are worried about the state of their finances, they stop spending, and when people stop spending, that can signal serious problems on a macroeconomic scale.
How Brits will adjust their spending habits is unknown, but in a new survey, US banking giant Morgan Stanley has attempted to quantify what sorts of spending might be cut if times start to get tough as the brutal combination of rising inflation and stagnant wage growth hits.
Asking 1,000 people how they “might look to delay purchasing, or otherwise cut back spending, if they had to change their spending habits,” Morgan Stanley found that not eating out, as well as putting off buying things like furniture and TVs.
Here are the key quotes from Morgan Stanley’s UK economics team:
“When asked what they would do if they had to change their spending habits, the single most popular option for each item (ranging from clothing to mobile handsets to holidays) was to ‘spend as normal’ with the exception of eating out (where ‘spending less often’ was the marginally more popular choice).”
“Most consumers claim that they would continue spending as normal on food, domestic travel and utility bills. However, spending on ‘big ticket’ items (such as Furniture, Cars, electrical goods and major home improvement projects) would, in most cases, either be delayed or cut out altogether.”
And here is the chart:
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