FX.co ★ UK economy may face numerous problems

Analysts continue predicting gloomy futures for various countries. It seems that none of the countries will be able to avoid problems. Even such giants as the United Kingdom are preparing for a new global crisis that may cause a lot of troubles.

Although in the first quarter of the year, the UK’s GDP advanced by 0.8%, only January could be called a really successful month. The fact is that in March, GDP dropped by 0.1%. In addition, pessimistic forecasts are negatively affecting investors’ sentiment. Against the backdrop, the pound sterling slumped to a 2-year low against the US dollar. At present, there is every reason for a further rise in consumer prices and a decline in the main indicators. In March, inflation surged by 7% on a yearly basis, reaching the highest level last seen in 1992. The jump was mainly caused by higher prices of electricity (81%) and gas (36%).

Prices of food are also showing an unprecedented increase. Justin King, Formerly CEO of Sainsbury's, Britain's second-biggest supermarket, warned that “The UK's golden era of cheap food is coming to an end.” “We have been perhaps through a golden era. We spend much less as a proportion on average of our household budgets on food than we had almost any time in history, and that’s been [on] a long, gentle decline. It won’t actually be that high in historical terms but it will require adjustments in terms of how we all prioritize our family budget spending,” the former Sainsbury’s boss Justin King said.