- Consumer spending improves in July but remains below average
- Markit says consumer ‘anxiety’ may still curb spending
U.K. consumer spending eased in recent months as the Brexit vote heightened uncertainty, but the referendum result doesn’t seem to have stopped Britons temporarily splurging on summer fun.
Consumers spent more on new clothes, meals out and day trips in July, according to card transaction data analyzed by Visa and Markit. Overall, expenditure rose an annual 1.6 percent in July, up from 0.9 percent in June, though it remained below the first-quarter average of 2.4 percent.
“Expenditure remains on a lower overall growth trajectory as consumer confidence remains fragile,” said Annabel Fiddes, an economist at Markit. “Nonetheless, it appears consumers enjoyed the warmer weather in July.”
That weather-driven increase last month may mask a more fundamental erosion in confidence, with a potential impact on demand. Sentiment has fallen sharply since the June 23 referendum, with Britons becoming more pessimistic about their personal finances and the economy.
“Anxiety around Brexit and a slowing private sector economy may pose further downside risks to expenditure growth,” Fiddes said.
Domestic demand as a large driver of Britain’s recovery after the financial crisis, and their resilience may prove crucial in keeping the economy out of recession. The Bank of England left its 2016 forecast for household consumption unchanged at 2.5 percent last week, but cut its projection for the following year to just 1 percent. It sees even slower growth in 2018.