Durable goods consumption set to rebound

A range of policy decisions that encouraged consumers to bring forward purchases of durable goods contributed to keeping consumer spending weak in recent years. But with the replacement cycle now picking up pace, we think that the conditions for a rebound are in place. Our forecast is that private consumption will expand by 1% this year following a 0.4% increase in 2016. Consumer spending has recovered only slowly from the shock inflicted by 2014’s sales tax hike. In the fourth quarter of last year, it was just 3.2% higher than in Q2 2014. While service consumption has continued to expand at a steady pace, goods consumption has remained weak: purchases of both durable and non-durable goods remain well below the levels seen before the tax was raised.