Brexit headwinds: Pinched UK consumers dip into savings as incomes stagnate
New figures show consumers tempering spending
UK economic weakness has caught up with consumers. Photograph: Bloomberg
British households turned increasingly cautious in the three months to September as they raised their spending at the slowest annual pace since 2012, according to official data published on Friday.
In figures which underscore the headwinds facing the world’s sixth-biggest economy as Brexit approaches, the Office for National Statistics confirmed that gross domestic product grew by 0.4 percent on the quarter.
Annual growth was unexpectedly revised up to 1.7 per cent from 1.5 per cent, but the increase mostly reflected changes to data going back to the start of last year and it was the weakest increase since early 2013, the ONS said.
Households, under pressure from rising inflation and weak wage growth, saw almost no growth in their overall incomes, forcing them to dip into their savings.
The UK has grown more slowly than other big European economies this year as the rise in inflation, caused largely by the fall in the value of sterling after the 2016 referendum decision to leave the EU, caught up with consumers.
“The figures confirm the pressure on households,” Philip Shaw, an economist with Investec, said.
An expected fall in inflation next year and forecasts for a long-awaited rise in wage growth should ease some of the squeeze.
“But we will have to wait to see what actually happens,” Mr Shaw said. He noted that in contrast to the strain on consumers, British factories were growing strongly with manufacturing output up by 3.3 per cent in annual terms, helped by the recovering global economy and weaker sterling. Manufacturing accounts for only about 10 per cent of the UK’s economy, compared with 80 per cent from the services sector which grew by an annual 1.4 per cent, reflecting the weak domestic economy.