Sterling hits 7-week low after data suggests consumer slowdown

* Graphic: Sterling and gilt yields http://bit.ly/2dgAXn1

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Adds details, updates prices)

By Ritvik Carvalho

LONDON, March 7 (Reuters) - Sterling touched seven-week lows on Tuesday after weak consumer spending data added to worries Britain's economy is slowing as it prepares to trigger divorce talks with the European Union.

In the few months that followed Britain's vote to leave the EU last June, robust consumer spending had propped up the economy, surprising many economists.

But the weak pound - which has dropped nearly a fifth against the dollar since the referendum - has contributed to a jump in inflation, and Tuesday's data from the British Retail Consortium and Barclaycard indicated consumers may now be feeling the pinch.

Sterling fell as low as $1.2183 in morning trade in London before recovering to $1.2207 by 1756 GMT, still down 0.25 percent on the day.

The pound also hit a seven-week low of 86.83 pence to the euro.

"After months of positive data surprises, where negative views on Brexit’s consequences for the UK economy had to be justified, we could be finally experiencing the rolling-over of economic momentum in the UK," said Julius Baer (LSE: 0QO6.L - news) economist David Meier.

Mortgage lender Halifax also reported signs of a squeeze on consumers as annual house price growth cooled to 5.1 percent in the three months to February, the weakest rise since July 2013.

Domestic political developments have added to the negative sentiment around sterling in recent weeks, with talk of a fresh Scottish independence referendum, the collapse of Northern Ireland (Other OTC: IRLD - news) 's government, and potential delays to Prime Minister Theresa May's Brexit plans all creating uncertainty for investors.

"The run-up into the triggering of (Brexit talks) is having a negative impact, as have some of the recent data confirming a deceleration in growth in the first quarter of the year," said Stephen Gallo, currency strategist at BMO Capital Markets.

British finance minister Philip Hammond will deliver his budget on Wednesday. He has said he will keep "reserves in the tank" to see the economy through its looming Brexit challenge, signalling little room for extra spending despite better news on borrowing.

"The budget is not likely to look pretty tomorrow, with Brexit cash required," said Mizuho's head of hedge fund FX sales, Neil Jones. "Sterling should continue to grind lower." (Additional reporting by Jemima Kelly; Editing by Mark Trevelyan)