MNI BRIEF: Weak UK Incomes Dragging On Consumption - Dhingra
Nov-18 17:26By: Harrison Moore
Swati Dhingra+ 1
Weakness in UK consumption reflects weakness in real disposable incomes, Bank of England Monetary Policy Committee member Swati Dhingra said on Tuesday.
"Household costs from spending microdata is less optimistic on a real wage recovery" than had been estimated, she said at a lecture in Sheffield. Consumption growth has been consistently weaker than the Bank forecast since the post-Covid inflation surge, which some of Dhingra's colleagues on the MPC have argued is evidence of inflation scarring. (See MNI BRIEF: BOE Must Signal Consistency, Not Hike Rates - Mann)
She added that elevated energy and import prices are key contributors to ongoing inflation dynamics, while large Brexit effects are showing up in firm surveys.
"Experimenting with different assumptions and risks in a forecasting apparatus can help think through uncertainties, but forecasts are even more error-prone in turbulent times," she said, noting that different central bank forecasts had similar errors despite different modelling assumptions during the post-Covid inflation surge.
"Household costs from spending microdata is less optimistic on a real wage recovery" than had been estimated, she said at a lecture in Sheffield. Consumption growth has been consistently weaker than the Bank forecast since the post-Covid inflation surge, which some of Dhingra's colleagues on the MPC have argued is evidence of inflation scarring. (See MNI BRIEF: BOE Must Signal Consistency, Not Hike Rates - Mann)
She added that elevated energy and import prices are key contributors to ongoing inflation dynamics, while large Brexit effects are showing up in firm surveys.
"Experimenting with different assumptions and risks in a forecasting apparatus can help think through uncertainties, but forecasts are even more error-prone in turbulent times," she said, noting that different central bank forecasts had similar errors despite different modelling assumptions during the post-Covid inflation surge.
