Category
- Agriculture
- Automobiles and Machinery
- Bank, non banking financing, investment
- Blasting
- Construction
- Consumables
- Education
- Energy
- Engineer , Architecture and Geodesy
- Finance, Audit,Accounting and Brokerage
- Food
- Foreign Trade
- Geology Exploration
- Health
- Information Technology
- Insurance
- Labor Safety
- Legal and Business consulting
- Lighting
- Mining equipment
- Mining Services
- Other product and service
- Road
- Sewing and textile products
- Transportations
- Travel
Events
Brexit economy: weak pound stokes inflation as jobs market cools www.theguardian.com
The pressure on the pound from Britain’s vote to leave the EU is stoking inflation, denting household finances and putting a brake on spending, according to a Guardian analysis.
Official figures this week are expected to confirm the economy enjoyed a strong finish to 2016 as companies and consumers continued to shrug off the shock of the Brexit vote. But signs of a spending slowdown, corporate jitters around the triggering of article 50 and rising prices point to a more challenging growth outlook in 2017.
Seven months on from the referendum, the Guardian’s monthly tracker of economic news shows the weaker pound is being felt in the real economy more keenly than ever, as it raises the cost of imports such as energy and food and that gets passed on to consumers as higher prices in the shops.
To gauge the impact of the Brexit vote on a monthly basis, the Guardian has chosen eight economic indicators, along with the value of the pound and the performance of the FTSE.
The dashboard for January shows a worse than expected performance in four of the eight categories. Two were better than expected and unemployment was as expected. Inflation was higher than economists had forecast, hitting its highest level for more than two years in December.
Writing in the Guardian, a former member of the Bank’s monetary policy committee (MPC), Andrew Sentance, said two factors pointed to economic growth losing momentum: a slowdown in employment and rising inflation.
“For now, consumer spending and strong global growth are supporting the UK economy – and we have yet to see the negative impact on investment which many forecasters are expecting in 2017,” said Sentance, a senior economic adviser at the consultancy PwC.
“But the signals from the labour market are consistent with slower economic growth this year driven by heightened uncertainty following the Brexit vote. In 2017 and 2018, we should expect to see economic growth of close to 1.5%, below the 2% which the UK has achieved over the seven years of recovery so far.”
Among the more downbeat measures in the latest dashboard, the housing market lost momentum at the close of 2016, with property price gains easing and fewer sales. The UK’s trade position deteriorated further on the latest official measures as a jump in imports eclipsed a pick-up in exports. And in a worrying omen for an economy reliant on consumer spending, retail sales fell over the crucial Christmas period.
The public finances were in a slightly worse state than expected for December, but revisions to November figures improved the government’s chances of meeting its borrowing target for the full year.
On a brighter note, surveys from the manufacturing, construction and services sectors signal they all managed to expand again in December, beating economists’ forecasts and boding well for official GDP figures due on Thursday. That first snapshot of fourth-quarter economic growth is expected to show the economy expanded by 0.5%, almost matching the third quarter’s robust growth of 0.6%.
In the jobs market, unemployment remains low and wage growth is outpacing inflation, for now. But in a sign firms are growing more wary of hiring new staff, the number of people in employment has dropped and experts warn that firms’ rising costs will limit their ability and willingness to award pay rises this year.
It remains to be seen whether December’s unexpected drop in retail volumes will prove to be a blip or evidence of a squeeze on consumers. Publishing the sales figures, the Office for National Statistics warned against reading too much into one month alone. It instead highlighted quarterly data showing retail sales grew in the final three months of 2016. Reports on Christmas trading from retailers themselves meanwhile were largely positive, with some noting an early boost in November from Black Friday sales events.
But as inflation starts to bite and the jobs market shows signs of cooling, economists warn household budgets will deteriorate this year and retailers will struggle to keep sales rising. The industry itself is cautious in its outlook, with the British Retail Consortium flagging “growing inflationary pressures and persisting economic and political uncertainty”.
The Bank of England governor said this month that consumers appeared to have looked through Brexit worries to carry on spending. But in his first speech of 2017, Mark Carney also highlighted that the brisk pace of spending had been accompanied by a rise in household borrowing.
The Bank, which presents its latest outlook for the economy next week, expects pressures on consumers to rise further this year as a weak currency stokes inflation. The pound’s sharp moves over the last month have underscored its vulnerability to government announcements on the Brexit process. Sterling skidded to a three-month low against the dollar before Theresa May’s key Brexit speech as news leaked out that she would take the UK out of Europe’s single market. It then recovered as she confirmed any deal would be put to a vote but fell on this week’s supreme court ruling that MPs and peers must give their consent before the government can trigger article 50 and formally initiate Brexit.
David Blanchflower, also a former member of the MPC, said the pound was being buffeted by politics.
“The pound has been responsive to the May government’s many self-inflicted wounds,” said Blanchflower, professor of economics at Dartmouth College in the US.
“The pound moves down every time the prospect of a cliff-edge Brexit rears its ugly head. It strengthens on the possibility that the economic Neanderthals are not going to have their way.”
On stock markets, the pound’s loss has been the FTSE 100’s gain as the index continues to be flattered by a weak currency. The index hit a fresh record peak earlier this month and broke a near 20-year record for its longest run of closing highs. The drop in the pound has boosted the earnings of many of the companies in the FTSE 100 that report in dollars and it is up 13% since the 23 June referendum.
Published Date:2017-01-26
