Sluggish start to the year for retailers

It is always a challenge to get a proper reading of the underlying strength of consumer spending growth around this time of year, with changing seasonal sales patterns (including the introduction of Black Friday) altering shopping habits. The survey evidence paints a mixed picture for the start of the year. But looking ahead, the big picture is that the worst of the real pay squeeze is probably now over. Indeed, we expect CPI inflation to drop back over the course of this year. And indicators suggest that wage growth should accelerate over the coming months. With jobs growth still robust, and hiring intentions strong, the consumer backdrop should become a lot more favourable as the year progresses. As a result, we continue to think that consumer spending will grow by 1.7% in 2018, slightly above last year’s 1.5% rate.