With CPI inflation picking up quite quickly and nominal wage growth remaining subdued, households are already facing a squeeze on growth in their real incomes. Indeed, there are some signs that it is already contributing to a slowdown in spending growth. Nonetheless, favourable credit conditions, strong confidence by past standards and record levels of employment should ensure that spending growth slows, rather than collapses over the course of this year. National Accounts data showed that real household spending continued to grow at a steady pace in the fourth quarter of last year, increasing by 0.7% q/q. That saw consumer spending up by 3.1% y/y in 2016 as a whole, marking the strongest expansion since 2004.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services