Brexit: UK Consumer spending to slow but likely less than feared - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that the resilience of personal consumption has reduced the risk that the UK economy will fall into recession following the Brexit vote.

Key Quotes:

"Personal consumption is still deriving support from favourable labour market conditions. Uncertainty ahead of the referendum does not appear to have had much impact on the UK labour market which recorded more solid than expected employment growth in Q2."

"However, businesses have since signalled that they are likely to proceed more cautiously when hiring following the Brexit vote which could act as a dampener on personal consumption. In addition, the sharp plunge in the pound is likely to encourage a material acceleration in inflation rising above the BoE’s 2.0% target in the year ahead.

Assuming that wage growth remains subdued, higher inflation will dampen real disposable income growth prompting a slowdown in consumption growth."