Macroscope | Brexit pain is just beginning, and it’s about to get a lot messier
15.5pc plunge in the pound against the dollar has pushed up prices amid weak growth in wages, and squeezed British household purchasing power
As recently as last November, retail sales in the United Kingdom (UK) were expanding at an annualised rate of nearly 6 per cent, nearly as strong as the 7.2 per cent rise in October, the fastest annual increase since April 2002.
For the Conservative government of British Prime Minister Theresa May, who last month confirmed the UK is determined to make a clean break from the European Union (EU) in response to Britons’ unexpected decision last June to vote to leave the 28-member bloc, this was proof that the doom and gloom over “Brexit” was overdone.
Last month, the International Monetary Fund (IMF) even raised its growth forecast for the UK economy this year from 1.1 per cent to 1.5 per cent, the biggest single upgrade of any major economy in the IMF’s January update of its economic forecasts.
Brexiters were given further reason to rejoice earlier this month when the Bank of England, which shortly after the Brexit referendum predicted the UK economy would grow by just 0.8 per cent this year, also raised its forecast for growth in 2017 to a brisk 2 per cent, the same rate as last year.
Consumer spending accounts for roughly 60 per cent of the UK’s economic output (in stark contrast to Germany where exports account for approximately half of the country’s GDP), is emerging as a major focal point of anxiety for analysts and market commentators
Yet if supporters of Brexit think it is plain sailing from here on in, they are sorely mistaken.