U.K.’s economic forecast revised down
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.”