High street spending looking unambiguously weak (Jul 08)

Abstracting from the extreme volatility of the monthly data, the official retail sales figures appear to have been on a downward trend over the past few months. And there have been more concrete signs over the past month of slower non-retail spending too, especially in car sales. Spending growth is only likely to weaken further. Rising inflation is still eating into households’ spending power. And the small rises in unemployment seen so far are likely to be only the tip of the iceberg. At least we doubt that the Monetary Policy Committee will raise interest rates. But a cut looks unlikely until late this year. We now expect real consumer spending to stagnate at best next year, while retail sales volumes are likely to fall outright.