The UK economy is slowing as households face increasing pressure on the cost of living, according to data released on Friday, which showed retail sales fell and consumer confidence neared all-time lows.
The pound slipped more than a penny, falling below $1.29 for the first time since November 2020, after official data and surveys of consumers and businesses pointed to a sharp slowdown in growth or worse in the coming months.
A closely watched gauge of S&P Global’s operations showed growth slowed more-than-expected this month as companies grappled with rising costs and the outlook turned much bleaker.
Official data showed that retail sales volume in March fell 1.4 percent from February, worse than any economist in a Reuters poll had forecast.
Earlier Friday, market research firm GfK said consumer confidence this month fell to almost its lowest level on record nearly 50 years ago.
Overall, the data underscored the Bank of England’s growing concern over the opposing challenges of weaker demand and inflation at a 30-year high of 7% and a likely further rise above the central bank’s 2% target.
Governor Andrew Bailey said on Thursday the BoE is walking a fine line between fighting inflation and avoiding a recession, a challenge facing other major central banks around the world.
“Whether the UK is headed for a recession is still an open question,” said ING economist James Smith, who highlighted the savings potential that many households have built up during the coronavirus pandemic to further fuel growth.
“The jury is out, but we think the Bank of England is likely to hike rates one or two more times before hitting the pause button over the summer.”
The S&P Global Composite Purchasing Managers’ Index fell 57.6 from 60.9 in April. While still comfortably above the 50 growth line, most economists polled by Reuters had expected a smaller decline to 59.0.
Consumer-focused companies are likely to face a difficult period in the coming months as GfK’s indicator of household confidence in their future finances plummets to a record low.
The Office for National Statistics said food and gasoline sales fell sharply over the past month, citing rising prices as a possible explanation for the declines. Online retail sales also fell.
Retail sales are 2.2 percent above their February 2020 level, but they’re well below where they would have been if growth had continued at its pre-pandemic trend, said Keith Church, an economist at risk consultancy 4most.
Earlier this month, Tesco, Britain’s largest retailer, warned of falling profits as high inflation weighs on the supermarket group and its customers.
https://www.independent.ie/business/world/uk-economy-stumbles-as-consumers-firms-brace-for-downturn-41576974.html The UK economy stumbles as consumers and businesses prepare for a downturn