Falling UK pound and rising prices fuel fears of slowdown: Analysis

The British economy is losing momentum following a post-EU referendum bounce, as the weak pound and higher inflation signal a fall in living standards, according to new analysis.

The latest Guardian analysis of the post-Brexit economy shows a sharp fall in the value of the British currency against the US dollar.

The pound is hovering around $1.22, about 18 percent lower than on June 23, the day of the referendum.

“The underlying pressure on the currency has remained following [UK Prime Minister] Theresa May’s declaration that she will trigger article 50 before the end of March 2017,” the report said.

Inflation also jumped more sharply than expected to 1 percent, the highest level in almost two years, while the UK trade deficit with the rest of the world widened, according to the analysis.

“Four months on from the Brexit vote, there are warning signs that consumers should prepare for a renewed squeeze in living standards, as the weak pound drives inflation higher and cautious businesses rein in wage growth,” the report noted.

Britain is heading for a “Brexit tsunami,” said David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee (MPC).

Blanchflower, who is also a professor of economics at Dartmouth College in the US, says Britain is already being hit by higher prices, slowing wage growth and rising unemployment.

Andrew Goodwin, a senior British economist at the forecast group Oxford Economics, also pointed to growing upward pressure on prices.

“Both the retail sales and inflation releases suggested that price pressures are on the turn,” he said. “We expect consumer price inflation to accelerate sharply from this point onwards, averaging 2.7% in 2017. This will severely squeeze household spending power and cause spending growth to slow sharply.”

ME