While consumer spending growth has lost pace in the face of the ongoing real pay squeeze, talk of a collapse in spending is overdone. With inflation set to fall back next year as the impact of the drop in the pound fades and a modest acceleration in wage growth in prospect, the squeeze on real incomes should not be particularly prolonged. Admittedly, there is the possibility that Brexit concerns weigh heavier on consumers’ minds. Nonetheless, we expect consumer spending growth to maintain a reasonable pace over the next couple of years.
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