Economic Monitor

Economic Monitor: Consumer Confidence Experiences Hiccup

  • Harvir Dhillon avatar
    Harvir Dhillon Economist
  • Kris Hamer avatar
    Kris Hamer Director of Insight | BRC

"Overall economic growth is expected to plateau over the final quarter of 2023. Despite signs of a cooling labour market in higher unemployment and falling demand for workers, consumption continues to hold up and services activity even managed to expand in the run-up to the final quarter.

Early survey evidence suggests consumer demand is weakening, and this is visible also in retail sales, with volumes showing slight declines relative to a year ago. Input costs remain high, and upward pressure is being placed on these costs due to strong oil price growth in recent months, alongside persistently high wage growth in the wholesale and retail sector.

At their meeting yesterday, the Bank of England voted to keep interest rates unchanged at 5.25%, stressing that no cuts are on the table until inflation returns to the 2% target. Only up to a third of the cumulative impact of interest rate hikes has taken place, implying two-thirds of tightening is still to be felt. The impact on household and business balance sheets is thus still in progress, and the refinancing of mortgage as well as corporate debt will take place in a staggered manner, between now and 2025. This points to a stagnant economic outlook over the coming quarters with heightened geopolitical tensions in the Middle East increasing the risk of stickier inflation in the near term."

Harvir Dhillon, Economist at the British Retail Consortium


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