Resilience of consumer spending is unlikely to last

Consumer spending continues to be a relative bright spot in the global economy. Spending growth picked up to a healthy 2.9% quarterly annualised in the advanced economies in Q2 (see Chart 1), reflecting marked improvements in the US and Japan. But the latest Japanese retail sales data bode ill for Q3, despite hopes that households might bring forward purchases ahead of October’s sales tax hike. Consumer confidence is soft both there and in the euro-zone. And while US households are benefitting from falling mortgage rates, there is now firmer evidence that the labour market is turning. Elsewhere, Chinese consumer spending growth is already weakening, partly related to a slowdown in bank lending. In all, a loss of momentum in the consumer sector will be one factor contributing to a further global slowdown in the quarters ahead.