The 0.3% upturn in the economy in the first quarter of the year has been matched by a marginal 0.1% increase in consumer spending, according to the latest figures from the Office of National Statistics (ONS).
Despite this growth figure, consumer spending at its slowest pace since the third quarter of 2011, as consumers’ budgets continue to be strained by rising inflation.
While average income grew by a figure of 0.8%, inflation was confirmed at a rate of 2.4% this week – three times the rate of wage growth.
Commenting on the figures, Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The breakdown of the data is rather disappointing and not that supportive to hopes that the economy is establishing a firmer footing.
“Consumer spending only edged up 0.1% quarter-on-quarter, while there were declines in investment and exports, which hardly points to an economy rebalancing.”
CBI’s recently monthly distributive trades survey revealed that sales volumes fell for the first time last month since August, and are set to plummet further, revealing that consumer confidence has yet to fully bounce back amidst the UK’s precarious economic climate.
Chris Williamson, chief economist at Markit, argued that this figure comes as no real surprise considering the UK economy has yet to make a full recovery:
“The renewed weakness of retail sales is no surprise given the financial pressures facing households at the moment.
“Inflation is running at 2.8% while regular pay is growing by just 1 per cent per annum – the lowest on record. Households remain all-too aware of the fragility of the economy and the lack of recovery.
“Unfortunately, the CBI survey suggests that there is a risk that the consumer could once again act as a drag on the economy in the second quarter.”
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