On Thursday, official statistics revealed that the British household spending is growing at its weakest pace since 2014 just three months after June. This, being the consequence of a weaker pound since 2017’s Brexit vote weighed on the spending power of Briton.
The Office for National Statistics remarked that there had been a year-on-year drop of 2.0 percent from 2.6 percent after developing to just 0.1 percent in the second quarter.
ONS further added that the overall growth in gross domestic product was unchanged from an estimate of around 0.3 percent on a quarterly basis and 1.7 percent annually earlier. This has been the weakest start since 2012.
Darren Morgan, a statistician in ONS, said that “GDP growth has slowed markedly in the first half of the year.” He also added that “household spending grew weakly, with the lower-value pound hitting household budgets.”
There has been a decrease of around 15 percent in Sterling on a trade-weighted since June 2016’s vote to leave the European Union. Thus, consumer price inflation is at its highest in almost four years last May. This also added to its losses following the latest data.
Thursday’s figures also revealed that there had been a year-on-year stall on the growth of business investment of zero to 0.7 percent in the first quarter. On the other hand, net trade dragged the annual growth down by a rate of 0.5 percent.
There has been an increase of 1.8 percent in the economy of Britain in 2017, one of the fastest rates among seven largest advanced economies of the world, capped by a growth of around 0.7 percent in the year’s last three months.
However, that growth depended heavily on massive consumer spending, which in 2017 has come under intensified pressure from rising inflation as there has been a push up in prices in stores in response to the sharp fall in sterling after the Brexit vote.
It was said by the Bank of England earlier this month that it expected growth in the economy of around 1.6 percent this year – slower than what it has forecasted earlier but in line with the expectation of economist as surveyed by Reuters.
While it is expected that the growth in household consumption is going to slow down to 1.75 percent this year as inflation nears 3 percent, it projects that a rise by 3.5 % and 1 % in forecast export volumes and business investment, respectively.
The BoE is expected by few economists to increase interest rates before the year 2019 as inflations are predicted to decrease in 2018 once a fade on the impact of sterling’s weakness is observed. Also, a scepticism during two years of talks on Brexit is expected to drag on growth.