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UK consumers gloomiest since 2013, car production slumps

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By Reuters
UK consumers gloomiest since 2013, car production slumps
FILE PHOTO: MG6 cars sit on the production line at the MG Longbridge factory in Birmingham, central England April 13, 2011. REUTERS/Darren Staples   -   Copyright  Darren Staples(Reuters)

By David Milliken

LONDON (Reuters) – British consumers are their gloomiest in more than five years, business sentiment is its weakest since the 2016 Brexit referendum and car output has tumbled this year, according to three surveys that paint an ominous picture for 2019.

Brexit worries weighed on consumer and business morale, according to the surveys, while car production is falling at its fastest rate since Britain was last in recession in 2009.

GfK’s monthly consumer sentiment index edged down to -14 in December from -13, its lowest since July 2013 although it was in line with economists’ expectations in a Reuters poll.

While consumers felt better about their personal finances over the past year and were more willing to make major purchases, their expectations for the economy over the next 12 months tumbled to its lowest since December 2011.

“In the face of ever-rising costs, and the threat of higher inflation combined with uncertainty around the outcome of the Brexit negotiations, it’s no surprise that consumers are in a chilly mood of despondency,” GfK executive Joe Staton said.

With less than 100 days until Britain is due to leave the European Union, Prime Minister Theresa May has yet to win the support of much of her Conservative Party for the deal she struck last month with other EU leaders.

Without a deal Britain risks major economic disruption when it leaves the bloc.

On Thursday, Bank of England officials trimmed their forecast for quarterly economic growth in the last three months of 2018 to 0.2 percent from 0.3 percent and said the picture in early 2019 was likely to be similar.

Lloyds Bank said on Friday its monthly survey of business sentiment sank to its lowest since just after the referendum decision in June 2016 to leave the EU.

Similar to consumers, businesses were more downbeat about the outlook for the economy than their own financial situation.

“The expected slowdown in economic growth in Q4 could well be extended into early 2019, but there is potential for a rebound in sentiment should there be some respite in uncertainties that firms currently face,” Lloyds economist Hann-Ju Ho said.

A big slump in car production last month — linked to weaker growth in export markets as well as Brexit worries — is almost certain to weigh on fourth-quarter economic growth figures.

The number of cars produced in Britain in November fell 19.6 percent from a year earlier to 129,030, the Society of Motor Manufacturers and Traders (SMMT) said.

This was the biggest year-on-year drop in nine months, and production for the year to date is down 8.2 percent at 1.44 million cars, the biggest such decline since Britain’s last recession in 2009.

“Output (was) seriously impacted by falling business and consumer confidence in the UK allied to weakening export markets,” SMMT chief executive Mike Hawes said. “If the country falls off a cliff-edge next March the consequences would be devastating.”

(Reporting by David Milliken; Editing by William Schomberg)