Britons Start to Feel the Squeeze From Brexit-Fueled Inflationby
Consumer confidence falls to lowest level since 2013
Pound’s drop since referendum is pushing up inflation
U.K. households are starting to feel the pain from Brexit-induced pressure on their finances.
Multiple reports on Friday showed consumer confidence falling and a weakening of households’ spending power. All of that is likely a reaction to a jump in inflation, which some economists see reaching 3 percent next year as the pound’s post-referendum depreciation feeds through into prices.
The reports -- from GfK, YouGov and Asda -- all cited sterling as a factor in the changing mood in the U.K. The currency has fallen 18 percent against the dollar since the June 23 vote amid investor concern at signs the government is heading for a so-called hard Brexit, which could reduce access to the European Union’s single market.
“Consumers pay attention -- they know that it is likely that this situation will only get worse over the next year as Britain starts to negotiate its departure from the EU,” said Stephen Harmston, head of YouGov Reports. “While in time wages will adjust, at the moment all they are seeing is increased prices squeezing their household finances.”
The Asda income tracker, produced by the supermarket chain and the Centre for Economics and Business Research, showed U.K. families’ discretionary income increased by 9 pounds ($11) in September from a year earlier. That’s the first time since October 2014 that consumers haven’t seen double-digit growth.
With inflation picking up, Cebr economist Kay Daniel Neufeld said decreases in spending power “cannot be ruled out” in 2017.
A measure of consumer confidence published by GfK decreased by 2 points to minus 3 in October. Consumers’ expectations for the economy also declined. Separately, the CEBR said its household sentiment index also fell in October. Excluding an initial post-Brexit slump in July, the gauge is at the lowest level since September 2013.