The British Retail Consortium (BRC) has announced that UK gross domestic product (GDP) growth is down for first quarter, due to weak consumer spending.
The BRC also said that the second estimate of the UK’s GDP in quarter one has been slower than the initial estimate suggested, falling from 0.3% to 0.2% on the previous quarter. The estimate comes from the Office for National Statistics.
The BRC said the main reason for the slowdown is the drop in household expenditure growth, which it says has ‘decelerated to its slowest rate since the end of 2014’. It added that this is 'definitive evidence that the strong consumer spending of the second half of 2016 evaporated in early 2017.’
Expenditure
Household final consumption expenditure grew just 0.3% on the previous quarter, over two times slower than that of quarter four in 2016, and the slowest rate since quarter four 2014.
The BRC said that ‘the impact of sterling devaluation in June is now starting to filter through to prices, the Shop Price Index recorded rising food prices from February onwards, the first time there have been three-months of consecutive food price inflation since 2014.’
This means shoppers are buying the same amounts of food and drink but are forced to draw from their savings for more luxurious spending. Inflation is set to increase even more in the coming months, so the problem is not going to go away.
Positive Increases
However, despite all the doom and gloom, there are some positives for British retailers. The GDP release showed an increase in investment in the quarter. Gross fixed capital formation, which measures the amount of investment in the economy, grew at 1.2%. This is the fastest rate of growth since quarter two of 2015.
Since the pound is weak at the moment, 11% lower than its value this time last year, foreign investors are being attracted to the UK. As well as this, the manufacturing industry has reported continuous solid growth. The BRC suggest that the industry has used the ‘favourable conditions to plough back some of its profits into investment’.
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Aidan O’Sullivan. Click subscribe to sign up to ESM: The European Supermarket Magazine.
