The Pound Sterling fell by half a cent yesterday to $1.246, as the British Retail Consortium reported the “worst June on record” for the UK – down 1.3% compared to the same point last year.
The drop in consumer spending puts it at the worst since the mid-1990s. While some of the economic slowdown can be attributed to statistical shifts based on Brexit stockpiling, the lack of consumer spending reflects other pressures that are scaring people away from the high street and other retailers.
Helen Dickinson, the chief executive of the BRC, attributed the delay in resolving Brexit as the likely reason behind the subdued consumer confidence.
“Businesses and the public desperately need clarity on Britain’s future relationship with the EU. The continued risk of a no-deal Brexit is harming consumer confidence and forcing retailers to spend hundreds of millions of pounds putting in place mitigations – this represents time and resources that would be better spent improving customer experience and prices.
“It is vital that the next prime minister can find a solution that avoids a no-deal Brexit on 31 October, just before the busy Black Friday and Christmas periods.”
The Pound is still down today, having hit a six-month low of €1.110 against the Euro this morning ahead of today’s GDP data. There were concerns by some experts that the UK economy was at a standstill or even entering recession, but the confirmation of 0.3% GDP growth between March and May has allayed fears for now.
Despite the 0.3% m/m rebound in monthly GDP in May, it looks as though the economy contracted by around 0.1% q/q in Q2. That would be the first contraction since Q4 2012. But we don’t think we’re heading for a recession as GDP will probably rise in Q3. pic.twitter.com/1Cp57FcTDW— Capital Economics UK (@CapEconUK) July 10, 2019
May’s growth in particular – 1.4% - was a much needed bounce-back from a poor April. Helia Ebrahimi, Economics Correspondent with Channel 4 News, cited the car industry as the reason for the slight resurgence.
GDP rise almost all thanks to manufacturing bounce back +1.4% in May after massive (-4.2%) decline in April after car factories re-opened after Brexit shutdown #ukgdp— Helia Ebrahimi (@heliaebrahimi) July 10, 2019
The next quarterly results – due in August – are expected to continue the weak UK economic outlook. They will also be the first economic figures for the new Prime Minister – whether Boris Johnson or Jeremy Hunt. With the summer recess in Parliament approaching, time is quickly running out to resolve Brexit. The European Union might give the UK yet another extension, on the basis of a new Prime Minister and potentially a General Election, but if it does not then the UK’s hard exit from the EU could be the straw that breaks the economy’s back and cancels out the meagre GDP growth Britain is experiencing and pushing the UK into recession.
First 5 months of the year, UK GDP growth running at annualised 1.7. But only because Q1 was OK. Construction and services are both slowing, manufacturing flat year over year. We’re either going to have to cancel Brexit or win the cricket World Cup.— Kit Juckes (@kitjuckes) July 10, 2019