Stronger momentum in spending growth

June’s retail sales figures were a little weaker than expected, with sales volumes falling by 0.5% on the month. However, some fall back in June always looked likely after two consecutive large monthly increases in April and May. And sales still rose by 2.1% in Q2, the biggest quarterly increase in fourteen years and a vast improvement on Q1’s 0.3% fall. Meanwhile, the squeeze on households’ real income has come to an end. And real wage growth looks set to accelerate ahead, while employment is rising steadily. The upshot is that we continue to expect consumer spending growth to rise from 1.2% in Q1 2018 to 2.0% by mid-2019.