There has been little let up in the squeeze on consumers’ finances. But until now, at least, the consumer has been showing impressive resilience, with high-street spending having grown strongly over the last two quarters. Admittedly, growth in retail sales (which only accounts for about a third of total spending) has not been a particularly good barometer of total household spending – which increased by just 0.1% on the quarter in Q2. But a large part of the slowdown reflected a shift in car purchases from Q2 to Q1 to beat April’s rise in Vehicle Excise Duty. And our seasonally-adjusted measure of car registrations suggests that car purchases will not exert as big a drag on spending growth in Q3. As a result, consumer spending growth looks likely to register a modest pick-up in Q3. And as the inflationary effect of sterling’s fall dwindles from next year, there should be scope for spending growth to re-accelerate further.
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