Predictions of a recession have been reinforced after recent news that high inflation is hitting retail sales, business activity, as well as consumer confidence. For the second month in a row, the volume of retail sales in Great Britain fell because consumers curtailed their spending as a result of inflation.
This does not constitute advice and advice should be sought in all instances before acting on it.
Business activity slowed to the weakest pace since the pandemic lockdowns. Additionally, UK consumer confidence remained at minus 41 in July, the lowest since records began in 1974.
This all combined with the fact that inflation reached a 40-year high in June, hitting 9.4%, putting the squeeze on household finances and slowdown of business activity. Sky-high fuel and food prices contributed to the depressed confidence.
This isn’t exactly new, as recorded purchases have been either maintaining status quo or even declining since October last year. But in recent months, sales growth volumes have been revised down. While retail sales are decidedly down, food sales (the only sector to report an increase) actually ticked up 3.1% thanks to the Queen’s jubilee celebrations in early June.
Sales of fuel, clothing, and household goods, however, have sharply declined, suggesting the higher prices did actually deter them from spending too much in these areas. It’s clear that many people are struggling with many people unable to pay their energy bills, buying less food, and even borrowing money and taking out credit.
However, there might be some softening in input cost pressure. Predicted inflation could lead to a drop in household disposable income and and undoubtedly inevitable recession. So be prepared for the Bank of England to raise rates at its August meeting. Whoever the next prime minister will be, they’ll need to have a plan to revive an economy that sorely needs it.
As always, if you have any questions about how the current economic climate impacts you, either now or in the future, don’t hesitate to reach out. The experts at Dental & Medical Financial Services will be happy to answer any questions you may have and help you navigate the ups and downs of inflation.