U.K.’s eco­nomic fore­cast re­vised down

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - — Bloomberg News

LON­DON — The In­ter­na­tional Mone­tary Fund on Mon­day re­vised down its 2017 growth fore­cast for the U.K., cit­ing slower-than-ex­pected ex­pan­sion at the start of the year.

The pace will slow to 1.7 per­cent from 1.8 per­cent in 2016, the IMF said in an up­date of its World Eco­nomic Out­look, af­ter pre­dict­ing a pickup to 2 per­cent in April. The cut comes af­ter growth in the first three months of the year dipped to 0.2 per­cent, and data this week are likely to show barely any re­cov­ery in the sec­ond quar­ter.

While the U.K. ini­tially per­formed bet­ter than many ex­pected af­ter the vote to exit the Euro­pean Union in June 2016, ac­cel­er­at­ing in­fla­tion is start­ing to crimp con­sumer spend­ing, the big­gest driver of the econ­omy. The pound’s de­cline since the ref­er­en­dum has pushed in­fla­tion to 2.6 per­cent, above the pace of av­er­age wage growth.

In­for­ma­tion Han­dling Ser­vices Markit said Mon­day that its house­hold fi­nance in­dex fell to the low­est since July 2014 this month be­cause of ris­ing liv­ing costs. There was a sharp re­duc­tion in con­sumers’ ap­petite for spend­ing on big-ticket items like house­hold ap­pli­ances and hol­i­days.

The U.K. Trea­sury re­sponded to the IMF re­port by say­ing that the “fun­da­men­tals of our econ­omy are strong.”

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