Pound Falls and Consumers Pay The Price
Consumers are facing the sharpest increase in prices on goods and services in almost a decade, according to a new survey
A survey from the data firm IHS Markit and the Chartered Institute of Procurement and Supply (Cips) found firms in the services industries were rising prices in November as a response to the drop in the Pound. This is the fastest pace since February 2008.
This will worry consumers already caught by weak wage growth and rising inflation.
Businesses have been forced to start protecting their profits by passing on higher costs for food, fuel and salaries.
The prospect of higher consumer prices will be bad news for consumers, but it could offer a boost to the economy. Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics expects increases in consumer prices will accompany some modest rates of economic growth.
This follows an unexpected drop in consumer spending, where the usual discount bonanza, Black Friday, failed to encourage consumers to spend money on the high street. Some firms noted that stretched budgets and uncertainty as a consequence of Brexit had acted as a brake on growth.
There have also been improvements in other areas, with the smaller manufacturing and construction sectors expecting modest growth in the coming year.
Chris Williamson, chief business economist at IHS Markit, said the new indicted “a degree of optimism in pockets of the economy, notably financial services, tourism, manufacturing and house building”.
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