Easing in real pay squeeze to pave the way for pick-up in spending growth

While household spending growth slowed markedly in 2017, the outlook for 2018 and beyond looks brighter. Indeed, the worst of the real pay squeeze appears to have passed. Following a peak of 3.1% in November 2017, CPI inflation has started to fall back and we expect it to continue to fall to around 2¼% by the end of the year. Meanwhile, surveys of salaries points to a pick up in nominal wage growth ahead. Overall, we expect consumer spending growth to average 1.5% this year, with growth accelerating in the second half of the year. We forecast growth of around 2% in 2019.