Ashton Whiteley: UK Inflation Surges to 2.9%

Shanghai, China, June 15, 2017 (Newswire.com) - British consumers will continue to feel increasingly squeezed as inflation in Europe’s second largest economy surges higher as a consequence of a dramatically weakened pound sterling, says Shanghai-based investment house, Ashton Whiteley.

The British pound has still yet to fully recover from the drubbing it suffered following the surprise of last year’s referendum on the country’s membership of the European Union. Hopes for a recovery in what was once the world’s reserve currency were dealt a fresh blow after the Office for National Statistics (ONS) released its official inflation data for May earlier this week.

"The rate at which prices are rising is greater than the rate at which wages are increasing. Consumers will inevitably tighten their belts and will almost certainly be less inclined to spend. This is a major issue considering consumption makes up more than 70% of the country's economy."

Ashton Whiteley Currency Analyst

According to the ONS, inflation ticked higher to 2.9% in May compared to a 2.7% rate for April. The rising costs of package holidays and imported computer games contributed significantly to the increase with food and clothing also gaining marginally.

“This is not good news for the UK,” said an Ashton Whiteley currency analyst. 

“The rate at which prices are rising is greater than the rate at which wages are increasing. Consumers will inevitably tighten their belts and will almost certainly be less inclined to spend. This is a major issue considering consumption makes up more than 70% of the country’s economy.”

Earlier this week, credit card company Visa said that household spending in the UK had fallen for the first time in 4 years during the month of May.

With concerns over how the UK government will approach Brexit negotiations following last week’s surprise election result in which the Conservatives lost their parliamentary majority, the pound is set to remain under pressure on the currency markets. Nevertheless, Ashton Whiteley has told clients to take advantage of the weakness in sterling to acquire stocks in some of the country’s multinationals.

“Many of the companies that make up the FTSE earn much of their revenue in US dollars. The pound’s weakness against the dollar means higher revenues when those dollars are repatriated and potentially higher profits,” explained the Ashton Whiteley analyst.

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Source: Ashton Whiteley