Brexit Briefing: UK Consumers Continue to Drive Economic Growth

Talking Points

UK consumer spending continues to be strong in a arise of June’s Brexit referendum.

But there are still warning signs that consumer spending will be hit by headwinds subsequent year.

The UK’s post-Brexit EU trade understanding could take a decade to finish and still fail, warns official.

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Wednesday’s UK jobs information suggested that British employers are finally negligence their employing in a arise of a Brexit vote. Yet UK consumer spending has so distant been strong given June’s Brexit referendum and continues to expostulate mercantile growth, and with it expectations that a Bank of England may, subsequent year during least, start to suppose lifting UK interest rates.

Retail sales expansion slowed final month from October’s 14-year high, central information showed Thursday, though sales volumes in Nov were still 5.9% aloft than a year ago, and were somewhat improved than analysts had expected.

This gave a British Pound a boost opposite a Euro nonetheless not a Dollar, that remained in direct after a US Federal Reserve’s Wednesday rate boost that increased it opposite both Sterling and a Euro.

But copiousness of economists are still warning that consumer spending will strike by headwinds subsequent year as rising inflation, due to a weaker Pound given a Brexit vote, puts vigour on domicile budgets. There will also be heightened doubt in 2017 as grave Brexit procedures get underneath way, that could impact expansion and extent a potential for rate rises.

But how much of this can we take as read? The Bank of England, for example, as it currently voted unanimously to keep seductiveness rates unchanged, is now disturbed that a Pound’s 6% convene over a past month could alleviate a approaching swell in acceleration subsequent year. This would also potentially revoke a chances of a rate rise.

What we can be some-more certain about is that a Brexit negotiations are expected to be formidable and fraught. And that will import on a Pound unless there are clearer signs of a potential supposed “soft Brexitrather than a hard Brexit. Today, a BBC reported that Britain’s envoy to a EU, Sir Ivan Rogers, has secretly told a supervision that a post-Brexit UK-EU trade deal competence take 10 years to finalize and still fail.

The government, meanwhile, is still insisting on personification a cards really tighten to a chest. Brexit Secretary David Davis told MPs yesterday that a government’s devise for Brexit negotiations will not be published until Feb during a earliest, and there was a lot of investigate and process work to be finished before it was ready.

— Written by Oliver Morrison, Analyst

To hit Oliver, email him during oliver.morrison@ig.com

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