What's going on?

Data out on Thursday suggested that two key pillars � consumer spending and business investment � of the British economy were shakier than expected in the second quarter. Another sign that the UK�s growth is falling behind other major economies.

What does this mean?

Thursday�s data showed that Britain�s economy grew 0.3% in the second quarter, which was unchanged from the initial estimate. However, the growth was largely due to government spending (for example, when the government spends money on stuff like infrastructure, it contributes to economic growth). Spending by individuals, which makes up two-thirds of the economy, barely grew and investment by businesses (e.g. buying new equipment) was flat.

Why should I care?

For markets: Low growth usually equals low interest rates � and a weaker pound.

The UK�s central bank is unlikely to raise its target interest rate unless economic growth picks up (remember, higher interest rates create a headwind for growth partly by making it more expensive to borrow, and thus spend, money). Meanwhile, central banks in the US and the eurozone are both likely to take action soon to increase interest rates. Investors tend to move money to regions where interest rates are going up (since they�ll get paid more in the future) � which is a major reason that the pound has weakened this summer (it hit an eight-year low versus the euro earlier this week!).


For you personally: The squeeze on Brits� wallets may be peaking.

Despite its weakness this summer, the bulk of the pound�s selloff occurred last year (in the wake of the Brexit referendum). The weakness pushed up prices in the UK (a.k.a. inflation rose) as imported goods and services became more expensive. The good news is that price increases should begin to slow since retailers, and other sellers of products, have had a year to adjust their prices � meaning Brits should, effectively, have more money to spend going forward (unless the pound sells off sharply again!).