UK's consumer-led recovery to stall over sterling
Published 17/08/2016 | 02:30
The UK's consumer-led recovery is set to "grind to a halt" with inflation forecast to surge above 2.5pc in the first half of next year on the back of a weakened sterling, it has been claimed.
Sterling slightly strengthened yesterday, rising from three-year lows against the euro and pulling further away from a five-week trough against the dollar, after slightly higher than expected inflation data.
Consumer prices were up 0.6pc in July compared with a year earlier - better than economists had forecasted - although still well under the Bank of England's target of close to 2pc. The increase was attributed to rising fuel prices, although the Office for National Statistics (ONS) said there was no obvious impact from the Brexit vote.
The London-based Centre for Economics and Business Research said consumer spending has helped drive the recovery in the UK in 2014 and 2015.
"The problem is that this could soon be coming to an end," said CBER director Scott Corfe.
"The sharp decline in the value of sterling since the Brexit referendum will translate into higher prices for imported goods over the coming months, pushing inflation to above 2.5pc in the first half of 2017."
And the think tank said it expects wages to decline by 0.1pc next year, after rising by 2.4pc in 2015 and 1.5pc this year.
"The UK's strongly consumer-driven economic recovery is about to grind to a halt," Mr Corfe added.