-Above-target inflation continues to weigh on consumer spending
Despite the better economic growth data compared with expectations prior to the European Union referendum, a weak pound and above target inflation continues to weigh on U.K. consumer spending.
According to National Statistics Office, last week’s retail sales data showed that sales grew modestly by 0.3 percent. Retail sales grew by 1.3 percent in June on an annual basis - which was also below the expectation of a 1.7 percent expansion.
A weak pound continues to pressure consumer spending while the rise in household income rise has fallen behind inflation. In July, consumer price inflation stood at 2.6 percent, down from May's near four-year high of 2.9 percent. However, despite the slowdown, inflation is still well above the Bank of England’s primary target of 2 percent.
According to Ole Black, an Office for National Statistics (ONS) senior statistician, U.K retail sales overall shows a “subdued picture.”
“Strong food sales have been responsible for the growth of 0.3 percent in July compared with June, as all other main sectors have shown a decrease. Whilst the overall growth is the same as in June, trends in growth in different sectors are proving quite volatile,” Black added.
On the other hand, according to ONS data released last week, the number of visitors to the U.K. have risen to 3.5 million in July, a rise of 7 percent compared with the same month last year. In the U.K., visitors spent 2.2 billion pounds in July.
According to Howard Archer, chief economic adviser to forecasting group, EY Item Club, the big increase in visitors from North America, from 483,000 in June of last year to 650,000 this year, was 'clearly buoyed by the particularly sharp drop of the pound against the dollar since mid-2016.”
'Tourism is one of Britain's most valuable export industries and this continued growth demonstrates the industry's increasing importance as a key driver of economic growth across our nations and regions,” the BBC reported VisitBritain director Patricia Yates as saying.