Consumers in the UK are facing the longest decline in their spending since 1970’s, people eying on Bank Of England for speculating the rise in interest rates anytime soon.
According to data published on Friday, the world’s 5th largest economy plunged into slow progress in the early 2017, while Sterling getting better against dollar the economy itself slowing down dramatically.
Improvement was projected in the services sector during the second quarter, but the inflation is accelerating, after the Brexit vote, fall in sterling and stagnant wages made it worst case scenario for consumer spending.
Tesco, the Britain’s largest retailer has also announced pay rise for Tesco employees by up to 10% during the next two years, in order to fight back inflation and improve the consumer spending.
According to office for national statistics ONS, disposable income adjusted for inflation fell for consecutive third quarter. Household savings ratio recorded all time low and this was the worst case in the last 40 years.
According to the GfK survey consumers have strong decline in confidence, since the national elections. Due to some policy makers at the Bank of England started signaling first rate hike approaching to battle inflation, the weak data was recorded.
Investors also tumble upon the news and voting in favor of interest rates increase, chief economist at central bank might also vote for rise in interest rates soon. Investors were expecting the rate increase not sooner than 2019 leaves them in worry.
ONS confirms the rise in business investment by 0.6 percent during Jan, Feb and March of 2017, only partial fall in the fourth quarter. And that was most probably due to the Brexit talks, General elections and now the expected rise in interest rates.
Country’s most participative, services sector grew by 0.2% in April, which was little lower in March but, the growth rate was up by 0.2% in the first three months of the year.
Alan Clarke, economist at Scotiabank said in a statement “According to our understanding the currently affected areas in the economy are consumers, domestic inflation and wages, we believe Bank of England should not give the interest rates hike in this scenario, but by the speakers gestures, it looks they will.”
According to Reuters, Britain being one of the fastest growing economy of the world, among the 7 richest countries has appeared to be the weakest performer in the first quarter.
Now it would be interesting to see what Brexit talks could do in shaping the economy’s other quarters along with interest rates hikes.