Tourists buying luxury goods boosts consumer spending
Tourists taking advantage of the Brexit-hit pound to snap up luxury goods have helped boost consumer spending, according to a Bank of England report.
The Bank's monthly agents' report said sterling's near 20% plunge since the EU referendum result had caused spending on luxury products to rise, while the demand for new cars softened.
In its November update on Britain's business conditions, the Bank said business sentiment was bouncing back from its post-Brexit vote fall, but "remained relatively fragile" amid uncertainty over the long-term outlook.
Investment and employment intentions were both stable, while the hard-hit commercial property market was recovering, the Bank said.
"Overall, firms in the survey reported expectations of broadly stable or slightly lower investment spending in the year ahead, after quite a significant increase in investment over the past year."
Inflation has notched up to 1% in September as the rising cost of clothes, restaurants and hotels pushed up the cost of living.
The Bank's forecast last week showed inflation shooting up to 2.7% next year, prompting some economists to warn that Britain is heading for a ''cost of living crisis''.
But in its reports, the Bank's agents said the supermarket price war was helping keep price rises at bay.
"Pass-through of higher prices in supply chains to consumer prices had so far been limited, reflecting strong competition between retailers," it added.
The Big Four grocers - including Britain's biggest supermarket, Tesco - have been locked in a bitter price war following the rise of the German discounters, Aldi and Lidl.