The British pound was sharply down 1.44 percent against the US dollar. In London morning deals on Friday, sterling sank to $1.284, its lowest level since late 2020. It comes after new figures revealed this week Britons were cutting down on spending as the cost-of-living crisis continues to escalate.
Weak retail and consumer confidence figures have sent Sterling plummeting, with British retail sales dropping by 1.4 percent in March from February. The drop was significantly worse than the 0.3 percent forecast in a Reuters poll and marked the second consecutive monthly decline.
Andrew Bailey, governor of the Bank of England said the the British central bank could deal with the fast rise in inflation without damaging the economy, but that it was a “narrow path”.
Asked at an International Monetary Fund event in Washington whether the BoE could pull off a “soft landing” for the economy, Mr Bailey said: “Yes, but as I said it is a narrow path.”
He added: “You can walk down a narrow path … but there is a lot of uncertainty around it which is why, I think, it is very clear to me, at each meeting we have we are going to have to come back to this judgement and see how it develops.”
He added that the BoE was dealing with opposing forces of a strong labour market adding to inflation and risks of a recession caused by higher food and energy prices squeezing household incomes as the cost of living crisis escalates.
Separate data released on Friday by the research company GfK showed that, in April, UK consumer confidence plunged to a near all-time low since records began in 1974.
The figures reflect falling consumer spending as Britons grapple with ballooning household bills due to rising energy costs and tax increases.
Economist at RS Thomas Pugh said the retail data was the first official sign of the toll high inflation was taking on consumer spending and the economy.
He warned that there was “worse to come” over the next few months, as the cost-of-living crisis is predicted to deteriorate in April due to skyrocketing energy bills and tax rises.
Data on retail sales from the Office of National Statistics (ONS) revealed that online sales were hit particularly hard as households cut back on spending.
Sales slipped 7.9 percent in March compared with the previous month – the largest monthly fall since January 2001.
Recent surveys by the ONS found that 54 percent of adults have reported spending less on non-essentials due to the increase in the cost of living.
Fuel sales have also fallen substantially by 3.9 percent amid soaring petrol and diesel costs, as households cut down on discretionary spending in an attempt to weather the cost-of-living crisis.
Food store sales also plunged last month, continuing a downward trend since November, with more than half of food production businesses reporting that they have been hit by “recent increases in energy prices”.
A drop in business activity has also added to Britain’s bleak economic prospects.
More than a quarter of businesses have reported that their production and suppliers have been affected by recent increases in energy prices in early April and the repercussions of Russia’s invasion of Ukraine.
This included 56 percent of accommodation and food service firms which reported that they had been impacted by energy costs.
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It comes after new figures published this week showed the prices of basic items including eggs, milk and fruit have all risen by more than seven per cent since April 2021.
ONS director of economic statistics Darren Morgan said: “Retail sales fell back notably in March, with rises in the cost of living hitting consumers’ spending.
“Online sales were hit particularly hard due to lower levels of discretionary spending.
“Fuel sales also fell substantially, with evidence suggesting some people reduced non-essential journeys, following record high petrol prices, while food sales continued to fall, dropping for the fifth consecutive month.”