UK Starts To Experience Inflation Pressure As Retail Sales Decline

By | February 26, 2017

The UK retail sales data is one of the important measures of inflation in the country. Despite the economic crunch, the retail sales data saved UK’s economy in the final quarter of 2016. However, the current numbers are not so promising for the nation. For the third month, the UK retail sales continue to decline. This means that consumers are not spending money on purchases because they start to feel the pressure of rising inflation rates.

In December, the sales of retail goods in stores reduced by 2.1%. Continuing the trend, the sales declined by another 0.3% in January. The market was anticipating an increase of 1%. In the past three months, the sales declined by 0.4%, recording the worst performance since 2013. The household spending was increasing in the last few months of 2016 and the economy was stabilizing to some extent.

However, the new data reveals that the Britons experience reduced purchasing power. As the prices continue to rise, the British households don’t spend as much as they used it. The cooling in household expenses was not surprising but the reality is harsh to comprehend. The UK economy relies heavily on consumer consumption. When the buying power of the Britons reduce, it could disrupt the economy in new ways.

The consumers of UK played a major role in making the economy resilient after Brexit voting. The current data shows that the people have lost the power to support the economy as the prices continue to increase. Consumers in the UK will have a hard time in 2017 as several things that were previously affordable become suddenly expensive. The declining retail sales number has a direct effect on the value of Pound. It lost 0.7% against the US dollar.

In the previous month, inflation reached an alarming rate of 1.8%. There is nothing the UK could do to reduce the inflation rates and it is set to increase all through 2017. The Brexit negotiations are going to be difficult as the consumers find it hard to deal with increasing import costs. The price of the retail goods increased 1.9% on annual basis and it is the highest increase since 2013. The slowdown of the economy is mainly caused by increased prices of food and fuel. It also forces the Pound to decline in the international market.

The total sales of household goods, food, and other products purchased online reduced greatly in January. As a result, the total sales was just 1.5% higher than the previous year. This resulted in the weakest annual growth. In fact, excluding the auto fuel, the total sales decreased by 0.2% per month.

Inflation is forecasted to rise this year and economists worry that it can easily reach 3%. The wage growth is not encouraging as it increases only by 2.6%. As a result, the British households will have less income to spend on household products. The BOE figures are not encouraging either. Investors expect that the BOE will increase the interest rate from a record low of 0.25% to cope up with the pressure.

Leave a Reply

Your email address will not be published. Required fields are marked *