Growth in household spending is likely to slow over the next few years as inflation rises and dampens growth in real incomes. But loose credit conditions and relatively upbeat sentiment by past standards should ensure that spending does not slow too dramatically. Admittedly, this strength will probably not last. After all, while wage growth has been picking up, inflation is on the rise too. Indeed, CPI inflation looks set to reach about 3% by the end of 2017 and, as a result, we should start to see fairly muted growth in households’ real incomes. Meanwhile, although overall spending has remained resilient, rising inflation already appears to have hit the growth in purchases of items with fast pass-through from the exchange rate into prices – including food and petrol.
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