Brits slash spending in another sign of looming economic woe
The worsening cost of living shock is prompting Brits to cut back on unnecessary purchases in a further sign the UK economy is headed for a period of worse than expected growth, reveals fresh figures published today.
Households are shunning luxury items in response to their living standards suffering a heavy blow from the highest rate of price rises in 30 years, according to Britain’s biggest business group the Confederation of British Industry (CBI).
Retail sales fell to a net balance of minus 35 per cent over the year to April, down sharply from nine per cent in the previous month.
The fall was much steeper than the City expected, with most analysts projecting sales to fall minus five per cent, underling the scale and severity of the inflation shock rippling through the economy.
“Consumers now appear to be tightening their belts, as the squeeze on households’ real disposable incomes intensifies,” Garbriella Dickens, senior UK economist at Pantheon Macroeconomics, said.
Prices are seven per cent higher than they were a year ago, the quickest increase since 1992.
However, most experts think inflation will scale even higher in the coming months, possibly peaking at 10 per cent in autumn due to the energy watchdog lifting the cap on bills again to account for higher wholesale oil and gas prices triggered by Russia’s invasion of Ukraine.
The CBI’s figures add to the growing body of evidence laying bare the rapid deterioration in the UK economy’s health since the start of the year.
Experts expected the end of Covid-19’s influence over the trajectory of the economy to send growth higher in 2022 at the beginning of the year.
But, a much steeper inflation shock, compounded by tax hikes and swelling bills sparked a flurry of downward revisions to forecasts due an anticipated drop in consumer spending.
Last week, the International Monetary Fund cut its forecasts for UK growth this year one percentage point and said next year Britain will notch the slowest growth rate out of any G7 country.
The Office for Budget Responsibility also downgraded its growth projections at March’s spring statement.