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IHS Markit

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Rising inflation troubles retail

A survey by London-based information and analysis company IHS Markit has found that the firm’s index measuring sentiment of UK households’ personal finances dropped from 47.1 to 45.8 between May and June, marking one of the lowest readings since 2013 and the lowest for three months.
“June’s survey reveals that UK household finances remain under intense pressure from rising living costs,” said IHS Markit senior economist Tim Moore.
“While the squeeze moderated slightly since last month, worries about the outlook have deepened.”
58% or respondents also expected interest rates to rise over the next 12 months, more than double the figure post Brexit referendum.
As the pound dropped further following the General Election, the Bank of England (BoE) kept rates to 0.25% in a bid to steady the financial ship. However, three of the right members of the Monetary Policy Committee voted for an increase, with widespread speculation of an imminent hike in rates.
This, along with inflation hitting a four-year high and outpacing BoE predictions, has caused concern within retail.
“Core inflation, which excludes food and energy, also unexpectedly picked up in May, reaching 2.6 per cent, the fastest since November 2012,” commented eCommera’s head of insight Alex Hamilton.
“The concern for retailers is that weak consumer confidence, amid political uncertainty and falling real wages, will make shoppers more price conscious, at a time when many brands are looking to pass on cost rises to their customers in a bid to protect margins.”