Brexit in­fla­tion push­ing Bri­tish shop­pers to cheaper goods

Kuwait Times - - BUSINESS -

Bri­tish firms are keep­ing a lid on pay and au­tomat­ing more pro­duc­tion while some shop­pers, faced with ris­ing prices, are switch­ing to cheaper prod­ucts, the Bank of Eng­land said yes­ter­day.

The find­ings came in a re­port from around the coun­try that showed Brexit is hurt­ing house­holds, mainly though the weaker pound. Busi­nesses serv­ing Bri­tish con­sumers are suf­fer­ing com­pared with ex­port-fo­cused man­u­fac­tur­ers, as the weaker ex­change rate and higher in­fla­tion fol­low­ing last year’s vote to leave the Euro­pean Union feeds through the econ­omy.

Last week BoE Gov­er­nor Mark Car­ney said Bri­tain’s econ­omy was suf­fer­ing from un­cer­tainty and higher prices caused by the ref­er­en­dum de­ci­sion in June 2016, and the cen­tral bank cut its fore­casts for fu­ture growth and wages. Yes­ter­day’s re­port by the BoE’s re­gional staff-which fed into last week’s fore­castsshowed busi­nesses planned to of­fer pay awards of be­tween 2 and 3 per­cent, de­spite grow­ing re­cruit­ment dif­fi­cul­ties.

“Over­all em­ploy­ment in­ten­tions re­mained mod­est,” the BoE said. “Growth in man­u­fac­tur­ing (em­ploy­ment) in­ten­tions was sta­ble and was damp­ened by a stronger fo­cus on pro­duc­tiv­ity im­prove­ments and au­to­ma­tion over job cre­ation,” it added. The BoE fore­cast last week that eco­nomic growth would slow to 1.7 per­cent this year and 1.6 per­cent in 2018, while wages are seen ris­ing by 2 per­cent and then 3 per­cent. Af­ter un­ex­pect­edly out­per­form­ing other big ad­vanced economies last year, in 2017 Bri­tain had its slow­est first half of the year since 2012.

Firms re­ported prices for goods and ser­vices rose at the fastest pace in four years, in line with of­fi­cial mea­sures of in­fla­tion, and con­sumer spend­ing growth slowed.

“Some con­tacts as­cribed this to in­creased cau­tion among con­sumers, and to con­sumers trad­ing down to cheaper prod­ucts or brands,” the BoE said. Sales at con­sumer ser­vices busi­nesses grew at their slow­est pace in over four years, while man­u­fac­tur­ing ex­ports saw their fastest ex­pan­sion since 2011. — Reuters

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