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Matthias Knab, Opalesque: Schroders writes on Harvest Exchange:
Since the UK voted to leave the European Union the domestic economy has experienced a more muted reaction than expected, as has the UK stockmarket. Sterling, however, has declined.
Stronger-than-expected consumer spending has helped support the economy, while, in part, the resilience of the UK stockmarket has been the result of investor appetite for international stocks with foreign - particularly US dollar - earnings.
But now that the trigger has been pulled on Article 50, what next?
Azad Zangana, Senior European Economist & Strategist, said: "The depreciation in sterling has largely been as expected and we are now seeing the inflationary effects of higher import prices feeding through into household inflation. We are trying to see how households will cope with this higher inflation. Real disposable incomes were growing at close to 5% at the start of last year, but by its end had actually fallen to zero as inflation picked up.
"Inflation has continued to rise and is currently at 2.3%. We forecast it to increase to up to 3.5% by the middle of this year, which implies disposable income will shrink further in the coming quarters, and should cause households to either reduce their spending or savings. As it happens, households have been reducing their savings for ...................... To view our full article Click here
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