The UK economy is heading for a slowdown or recession as consumers and businesses grapple with the uncertainty caused by rapid inflation, tax hikes, rising interest rates and the war in Ukraine. Bank of England Governor Andrew Bailey said on Thursday that the BoE is walking a fine line between fighting inflation and avoiding a recession. So far, Finance Minister Rishi Sunak has resisted calls for more budget support.
Below are a series of charts showing signs of strain for the world’s fifth-largest economy.
Confidence falls Market research firm GfK said on Friday that consumer confidence fell this month to its lowest level in almost 50 years. The report was a warning sign of a recession. According to the S&P Global/CIPS Composite Purchasing Managers’ Index, business confidence fell for the third straight month in April, hitting its lowest level since October 2020. Consumer spending in stores fell more-than-expected in March, contributing to the decline in February, according to official data released on Friday.
The UK economy will slow in 2022 and face weaker economic growth and persistent inflation in 2023 than other major wealthy nations, the International Monetary Fund forecast this week. The IMF said the 2022 and 2023 downgrades reflected “increasing inflationary pressures” and tightening monetary policy. CPI inflation jumped to 7% in the 12 months to March, a 30-year high, and is expected to rise further in April as larger electricity price hikes begin. The government budget forecast released in March said inflation could reach close to 9% later this year depending on energy prices.
Volumes are above pre-pandemic levels, but otherwise not. is also lower. Another figure from Thursday shows card payments spend for the week ended April 14. Falling wages and savings In the three months to February, the UK’s inflation-adjusted earnings fell the most since 2013, according to official data. Households are using up their savings during the coronavirus pandemic as pressure on incomes mounts. In the final three months of 2021, the amount households are saving as a percentage of total disposable income and outstanding pensions has fallen to near pre-pandemic levels.
The UK labor force is above pre-pandemic levels and is driving the economy. However, the total number of workers, including the self-employed, remains below February 2020. UK lenders expect loan defaults to rise in the coming months and plan to rein in mortgage lending by the largest amount since the start of the COVID-19 pandemic. A Bank of England study showed earlier this month.
Summary of the news:
- Warnings of a slowdown in the UK economy are flashing as inflation soars
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