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<\/p>\nThe pound has come under pressure as fears over “stagflation” stalk the economy amid a supply chain crisis and surging energy prices.<\/p>\n
Sterling dipped below $1.35 to hit a fresh eight-month low against the US dollar on Wednesday.<\/p>\n
“Stagflation” describes a period when an economy experiences stagnant growth and high inflation at the same time.<\/p>\n
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The pound has weakened from over $1.37 since the start of the week, during which scenes of panic-buying at petrol pumps have become the latest manifestation of the UK’s supply chain crisis<\/strong>, centred on a lack of HGV drivers.<\/p>\n Sterling had been trading at above $1.42 in June but has now fallen to levels last seen in January.<\/p>\n It comes at a time when high oil and natural gas prices<\/strong> caused by a confluence of global factors look set to hit consumers just as the economy’s recovery from the COVID-19 crisis weakens.<\/p>\n Bank of England (BoE) governor Andrew Bailey warned earlier this week that the recovery was entering “hard yards”.<\/p>\n Inflation recently hit<\/strong> its highest level for nine years and the Bank predicts it will soon head above 4%, while monthly growth figures showed economic growth almost ground to a halt<\/strong> in July.<\/p>\n New BoE borrowing figures published on Wednesday showed a relatively small uptick of £351m in consumer credit – covering the likes of credit cards, personal loans and motor finance – in August.<\/p>\n The level of such lending overall remains 2.4% lower than it was a year earlier, suggesting that households remained cautious about splashing out over the summer.<\/p>\n Meanwhile, data from the British Retail Consortium (BRC) showed a run of more than two years in which shop prices have been falling looks set to end over coming months as inflationary pressures take their toll.<\/p>\n It pointed to higher transport costs, labour shortages, Brexit red tape and commodity price rises starting to feed through to consumers.<\/p>\n Overall shop prices this month were 0.5% lower than last year though food ticked 0.1% higher – the first rise in six months – and some goods, such as DIY and gardening products, were seeing the highest level of inflation since 2018.<\/p>\n Elsewhere, a survey from Scottish Widows found that UK households had grown gloomier over the last three months as the post-lockdown recovery began to subside and prices climbed.<\/p>\n The darkening picture poses a quandary for the Bank of England on whether it can raise interest rates to head off the threat of inflation if that risks dampening growth even further.<\/p>\n![](\"https:\/\/e3.365dm.com\/21\/09\/768x432\/skynews-petrol-manchester_5527253.jpg\")
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