Signs of a Brexit hit slowly starting to appear in UK
Clear signs that UK consumer spending has been hit by rising inflation
Theresa May talking to students and first-time voters at Cox Green School in Maidenhead, England, on Friday. Photograph: Leon Neal/Getty Images
Has Theresa May called the UK general election in the nick of time? Or has she left it a month or two too late?
A key part of her pitch has been that the UK economy is thriving despite fears of a downturn following the Brexit vote. In the event, the economy moved ahead strongly in the second half of last year. Yet the signs of a Brexit hit are slowly but surely starting to appear. Ironically, this is happening alongside clear signs of a pick-up in the euro zone economy.
On Friday the latest data showed that UK retail sales recorded their largest decline in seven years in the first quarter, with clear signs that consumer spending has been hit by rising inflation.
In turn, higher prices in shops are due in large part to sterling weakness feeding through to higher import prices. In short, the first Brexit hit to living standards is feeding through.
The data showed the volume of goods sold fell 1.4 per cent from the previous three months, the most since early 2010.
One of the big drivers of the UK economy – consumer spending – is starting to show the strain. The Office of National Statistics said that the weakness seemed to be a consequence of price increases “across a whole range of sectors”. Prices in March were up an annual 3.3 per cent, the most in four years.
The impact of this on the general election is hard to call. A competent opposition might be able to take advantage. But with little sign of Jeremy Corbyn’s Labour gaining any ground, the only question seems to be the size of the increased majority that the prime minister will win.
But the impact on the UK economy could yet have an impact on the Brexit negotiations. May’s tactics could surely be affected by a combination of a weakening economy and warnings from business that worse is to come in the case of a “hard” Brexit.
Yet the intriguing thing is that Downing Street is still feeding out some uncompromising messages about London’s attitude to key issues such as immigration. Is this for real? Or is it a cover for a climbdown in the talks?
We may not know the answer for some months yet.