Consumer spending in the UK has dropped for the third straight month in July. It is the first time in four years that there was a three-month drop, with analysts pointing to the Brexit.
Higher prices and lower wage growth
In July, expenses dropped 0.8 % compared to the year before and it experienced similar drops in May and June. It hadn’t happened since February 2013, when the economy was still recovering from the financial crisis.
This time around, the brexit is weighing down the British consumer’s spending. “The figure provides further evidence that rising prices and stagnant wage growth are squeezing consumers' pockets”, said Kevin Jenkins, Visa's managing director for the United Kingdom and Ireland.
Only last week, the Bank of England lowered its economic growth forecast for 2017 and 2018, mainly because wages are not growing as much as expected. The slower wage growth is amplified through inflation caused by the Brexit and the weaker pound.
Strong hospitality industry
Clothing sales dropped 5.2 % in July, the second largest drop in a five-year time frame. It comes as no surprise, seeing how Brits mainly import their clothing. However, at the start of July, there was a slight surge, mainly thanks to the excellent weather, but unfortunately, the sales did not sustain.
The hospitality industry did not suffer as much as the rest of the economy, because many Brits decided to go on vacation locally, spending more money in their own establishments, thanks to the weaker pound.